Dollar’s reserve share ticks up, but central banks plan further cuts

The U.S. dollar's share of global foreign exchange reserves rose to 57.13% in the first quarter of 2026, up from 56.42% in the prior quarter, according to the IMF's Currency Composition of Official Foreign Exchange Reserves data released in late June. But the uptick masks a structural decline that analysts say remains firmly intact — the greenback commanded roughly 71% of reserves around 1999-2000, meaning it has shed some 14 percentage points over a quarter-century.data.imf

Valuation, Not Conviction

Roughly half the quarterly gain reflected dollar appreciation against other currencies rather than fresh central bank purchases, the IMF noted. Total global reserves dipped slightly to $13.10 trillion from $13.15 trillion the prior quarter. The euro's share fell to 20.03% while the renminbi edged up only marginally to 1.99%.cryptobriefing+1

The picture becomes starker over a longer horizon. A Reuters-reported OMFIF survey of 90 central banks and sovereign institutions published in June found that, for the first time, more respondents plan to shrink their dollar allocations over the coming decade than increase them, citing political risks tied to U.S. policy as the primary driver. The World Gold Council's 2026 survey found 74% of respondents expect moderate or significantly lower dollar holdings in global reserves over the next five years.gold+1

Fiscal Backdrop Adds Pressure

The data arrives as U.S. federal debt crossed $40 trillion in August and interest payments through the first ten months of fiscal 2026 reached $963 billion — exceeding the defense budget. The 30-year Treasury yield last week touched 5.336%, its highest since 2007. Treasury Secretary Scott Bessent has pledged to cut the budget deficit to 3% of GDP, though markets remain skeptical given the scale of mandatory spending and tax cut commitments.bloomingbit+1

Hedging, Not Defection

Central bank gold purchases have averaged roughly 1,000 tonnes annually over the past four years, double the prior decade's pace. Yet no single alternative reserve currency has captured the dollar's lost share. The renminbi remains capital-account-restricted, and BRICS members pursuing local-currency trade corridors — such as India and Indonesia's rupee-rupiah settlement framework operationalized in July — are adding parallel payment lanes rather than shifting reserve holdings.moderndiplomacy+1

As one analysis framed it, middle powers are "getting better at extracting savings from two financial systems at once, rather than picking one". The next test comes when the IMF publishes its Q3 COFER figures following the planned September launch of BRICS Pay — a result showing continued slow drift rather than acceleration would confirm that hedging, not defection, remains the dominant strategy.moderndiplomacy