In Q1, the U.S. dollar shares of global reserves rose; euro share falls

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According to IMF data, the U.S. dollar’s currency reserve reported to the International Monetary Fund increased to 59.5% in its first quarter from 58.9% the previous quarter.

Global central banks continue to hold the greenback as the largest currency reserve.

Global reserves are assets held by central banks in foreign currencies and used to support their liabilities. They are reported in U.S. Dollars. Reserves are sometimes used by central banks to support their currencies.

“Given U.S. dollars’s larger gains through Q1, the increase in U.S.dollar’s holdings might be more apparent than actual,” Shaun Osborne, Scotiabank’s chief FX strategist in Toronto, wrote in a research note following the release of IMF data.

In the first quarter, the dollar index gained 3.6%

He said that “broader trends do emphasize the gradual shift away U.S. dollars in reserve holdings.”

According to IMF data, 72.7% was the peak U.S. dollar allocation in Q2 2001. While currency diversification has progressed at a slow pace, Osborne stated that the trend has been consistent.

The first quarter saw a drop in reserves in U.S. dollars to $6.991 trillion, as compared to $6.996 trillion for the fourth quarter. On a quarterly basis, the reserve in euros fell 4.4% to $2.415 trillion.

In the first three months, the euro’s share dropped to 20.6%, compared to a 21.3% share during the last quarter 2020. The fourth quarter saw the largest share since 2014. At 28%, the euro had its highest FX reserve share in 2009

From 2.2% in three months ago, the Chinese yuan had a 2.4% share in the first quarter. China’s share has increased for five consecutive quarters. Yuan reserves rose 7% to $287 million. In 2017, the IMF began tracking the yuan’s share.

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