Are Central Banks Moving Out of Dollar Assets?

The dollar's dominance in global official foreign exchange reserves has been gradually declining, a trend that has sparked questions about the dollar's role in international financial markets. At face value, a 56 percent share of reserves in 2025, down from 64 percent in 2015, might suggest a systemic shift away from the dollar.

However, a closer examination reveals that the decline is not a uniform global phenomenon but rather the result of specific actions by a small number of large reserve holders. These changes can occur either through a reallocation of existing portfolios away from dollar assets towards other currencies, termed the "preferences channel," or through the accumulation or reduction of new foreign exchange reserves with dollar holdings at levels different from the global average, known as the "reserve change channel."

The aggregate dollar share figures can thus be misleading, as they do not necessarily reflect a broad-based movement away from the dollar. Instead, they often result from a mix of countries either increasing or decreasing their dollar allocations. When countries with below-average dollar holdings expand their reserves, they inadvertently lower the global dollar share, creating the illusion of a systemic shift.

This observation challenges the perception of a global retreat from the dollar, highlighting instead the diverse strategies and circumstances driving individual country decisions within the global reserve landscape.