Global Reserves Q2: Yuan, Aussie Dollar Gain as Dollar Falls

The Chinese yuan and Australian dollar increased their share in global currency reserves during the second quarter, according to the International Monetary Fund (IMF). In contrast, the U.S. dollar and euro lost some ground, reflecting volatility in currency markets.

The yuan and Australian dollar each gained 0.03 percentage points quarter-on-quarter, though both still account for just over 2% of the nearly $13 trillion in total global reserves. Meanwhile, the U.S. dollar fell 0.12 percentage points to 56.32%, and the euro stood at 21.13%.

Role of Currency Fluctuations

The IMF highlighted that swings in exchange rates largely explain the shift. The dollar index, which tracks the U.S. currency against major counterparts including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc, fell more than 10% in the first half of the year—the largest drop since 1973.

In the second quarter alone, the dollar weakened by 8%. According to the IMF, “Currency movements explain 92% of the reduction of the dollar’s share during the three months through June.” Similar exchange rate effects were noted for other major currencies, including the euro.

Rising Global Reserves

The total value of foreign exchange reserves held by central banks, measured in U.S. dollars, rose to $12.945 trillion at the end of June from $12.540 trillion in the first quarter. The IMF noted that fluctuations in reserve values do not necessarily indicate a shift in reserve managers’ preferences but are largely driven by market volatility.

Market Context and Dollar Dominance Debate

Policy changes under the Trump administration, including trade measures and interventions affecting the U.S. Federal Reserve, contributed to market uncertainty. Analysts have debated whether these shifts could eventually challenge the dollar’s dominant position in the global monetary system.

While some early signs of dedollarisation are visible, most experts agree that any significant change in the dollar’s global reserve status would be gradual.

IMF’s Adjusted Data Provides Clarity

The IMF’s adjusted figures, which now account for dramatic currency swings since the start of the year, provide a clearer view of how central banks across 149 economies are managing reserves.

Despite recent fluctuations, the U.S. dollar remains the largest global reserve currency. However, the small gains in the yuan and Australian dollar highlight a slowly diversifying landscape in global reserves.