'Strong Dollar Effect' Global Foreign Exchange Reserves Dollar Share Increases After 4 Quarters

[Photo by Reuters Yonhap News]

[Asia Economy Reporter Byunghee Park] Reflecting the strong dollar trend, the share of the dollar in global foreign exchange reserves increased for the first time in four quarters as of the first quarter of this year.

According to a report released by the International Monetary Fund (IMF) on the 30th of last month (local time), the dollar's share in global foreign exchange reserves at the end of the first quarter of this year was 59.5%. This is up 0.6 percentage points from 58.9% at the end of last year, which was the lowest since 1995.

Sean Osborne, Chief Investment Strategist at Scotiabank, explained, "Thanks to the dollar's strength in the first quarter, the share of dollar holdings increased."

The dollar index, which indicates the relative value of the dollar against six major currencies including the euro and yen, rose 3.6% in the first quarter of this year. The dollar strengthened amid expectations of large-scale economic stimulus measures following the inauguration of U.S. President Joe Biden.

According to IMF statistics, the dollar's share was highest at 72.7% in the second quarter of 2001.

At the end of the first quarter of this year, the euro's share was 20.6%, down 0.7 percentage points from the end of last year. The euro's share was highest at 28% in 2009.

The Chinese yuan's share rose 0.2 percentage points to 2.4%. The yuan's share has increased for five consecutive quarters.

In terms of holdings, the dollar amounted to $6.991 trillion, slightly down from $6.996 trillion at the end of the fourth quarter of last year. Euro holdings also decreased by 4.4% to $2.415 trillion. On the other hand, the yuan increased by 7% to $287 billion.

With the U.S. economic recovery and expectations of interest rate hikes, the dollar is expected to remain strong in the second quarter, potentially increasing its share in foreign exchange reserves further.

CNBC reported that the dollar index rose 2.6% in June, marking the highest monthly return since November 2016.

This content was produced with the assistance of AI translation services.