The U.S. dollar's status as the world's reserve currency continues to erode as gold and "non-traditional" reserve currencies gain ground.
According to data recently released by the IMF, the dollar's share of global reserve currencies declined further last year. Total holdings of dollar-denominated securities by central banks (excluding the Federal Reserve) fell by $59 billion in 2024.
At the end of last year, dollars accounted for 57.8% of global reserves. This is the lowest level since 1994, representing a decline of 7.3% over the past decade. In 2002, dollars accounted for approximately 72% of total reserves.
This is not the first wave of de-dollarization. The dollar's share of reserves plummeted during the inflationary years of the 1970s, but recovered during the 1990s as price inflation moderated and U.S. budget deficits narrowed thanks to the post-Cold War "peace dividend".
Today, the dollar faces a triple whammy: rigid price inflation, out-of-control federal spending that generates massive budget deficits, and global wariness of the West's use of the dollar as a weapon.
De-dollarization has accelerated since the United States and other Western countries imposed heavy sanctions on Russia following its invasion of Ukraine.
According to a report by the Atlantic Council, " in recent years, and especially since Russia's invasion of Ukraine and the subsequent escalation of the use of financial sanctions by the Group of Seven (G7), some countries have been signaling their intention to diversify their investments and move away from the dollar " .
What is replacing the dollar?