The latest data from the International Monetary Fund (IMF) reveals a continued decline in the US dollar's share of global central bank reserves, dropping to 59.2% in the third quarter of 2023. This trend reflects the ongoing de-dollarization momentum worldwide, with the greenback's share down from around 70% in 2000.
While the US dollar remains the dominant reserve currency globally, the euro comes second, with its share sliding to 19.6%. The Japanese yen's proportion of world reserves grew slightly to 5.5%, while the Chinese yuan, British pound, Canadian dollar, and Swiss franc saw minimal changes in their shares.
Simultaneously, data from SWIFT, the global financial messaging service, indicates that the yuan's share of international payments reached a record high in November, making it the fourth most used currency globally. China's efforts to shift away from the dollar and promote the use of the renminbi are reflected in the growing share of the yuan in cross-border transactions.
The broader global trend of using national currencies in trade, rather than relying solely on the US dollar, has gained momentum, particularly following geopolitical events such as Ukraine-related sanctions that led to Russia's isolation from the Western financial system.
Additionally, the US dollar is on track for its worst year since 2020, with the US dollar index, measuring its performance against six other currencies, down over 2% for the year. Prospects of rate cuts in the coming year have contributed to the dollar's weakening.
(With Agency Inputs)
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