'King Dollar' No More... Central Banks' Dollar Share Hits 30-Year Low

by Cha Minyoung

Published 02 Oct.2025 14:01(KST)

IMF: "Dollar Share at 56.32% as of End-June"

Reuters Yonhap News

The proportion of the US dollar in global central banks' foreign exchange reserves fell to its lowest level since 1995 in the second quarter. However, this was analyzed to be the result of a sharp decline in the value of the dollar, rather than central banks actively reducing their dollar holdings.

In a report released on October 1 (local time), the International Monetary Fund (IMF) stated that the dollar accounted for 56.32% of global central banks' foreign exchange reserves as of the end of June, down 1.47 percentage points from 57.79% at the end of March. This marks the lowest level in 30 years.

However, the IMF added that when measured at constant exchange rates, the dollar's share was calculated at 57.67% at the end of June, showing almost no change during the second quarter. In 2024, the share was recorded at 58.1%.

The IMF explained, "Ninety-two percent of the decline in the dollar's share in the second quarter can be attributed to exchange rate fluctuations," and noted, "Similar exchange rate effects are observed in other currencies, including the euro, which is the world's second-largest reserve currency."

During the second quarter, the dollar experienced a historic drop, falling 9% against the euro, 11% against the Swiss franc, and 6% against the pound.

The sharp decline of the dollar in the second quarter was attributed to several factors: heightened concerns about stagflation (a combination of economic stagnation and high inflation) in the US economy following President Donald Trump's announcement of reciprocal tariffs; repeated pressure from President Trump on the Federal Reserve, the central bank, to cut interest rates; and concerns that the "One Big Beautiful Bill" (OBBBA), which was passed in early July, would further widen the US federal government's fiscal deficit.

Meanwhile, the euro, which is the second-largest reserve currency after the dollar, saw its share rise from 20.00% at the end of March to 21.13% at the end of June, up 1.13 percentage points. This is the highest level since 2021. However, the increase due to exchange rate fluctuations was 1.17 percentage points, meaning that the total amount of euro holdings actually decreased.