International Monetary Fund or IMF has stated that US dollar’s share of reserves held steady in second quarter when adjusted for FX moves. In a latest update, the fund has noted that data on the currency composition of global foreign exchange reserves, COFER, track how much of the world’s reserves are held at central banks in different currencies—such as the US dollar, the euro, Japanese yen, Chinese renminbi, British pound, and others. The data are based on voluntary, confidential reports by 149 economies.
But a crucial detail is often overlooked: these shares are reported in US dollars. This means that if a country holds reserves in euros or yen, the value of those holdings is first converted into dollars before being added to the global totals. So, when exchange rates shift—even if no central bank buys or sells anything—reported shares change. The same can happen with movements in interest rates, but the impact on the currency shares was relatively small in the second quarter, it noted.
IMF noted that even if central banks made no changes to their portfolios, the value of their non-dollar holdings—when expressed in dollars—increased, resulting in a corresponding decrease in the share of dollar holdings. Raw data suggest a drop in the dollar’s share of allocated reserves to 56.32 percent at the end of the second quarter from 57.79 percent at the end of the first quarter, down 1.47 percentage points. However, by holding exchange rates constant, its share would have fallen only slightly to 57.67 percent. Thus, currency movements explain 92 percent of the reduction of the dollar’s share during the three months through June. Similar exchange rate effects can be seen in other currencies, including for the euro, the world’s No. 2 reserve currency.
The share of claims in the euro appears to have surged to 21.13 percent in the second quarter, from 20.00 percent in the prior three months, up 1.13 percentage points. However, valuation effects were responsible for 1.17 percentage points of this, more than the movement itself. If exchange rates had held steady, the euro’s share would have fallen by 0.04 percentage points to 19.96 percent in the second quarter