MUFG Research discusses the Composition of Foreign Exchange Reserves (COFER) data for Q1 2026 which showed USD holdings increased at the expense of EUR & JPY.

"The US dollar advanced by 1.7% in Q1 and the advance, mostly following the start of the conflict in the Middle East, was an important factor helping lift the USD composition in global reserves. After dropping to 56.4% in Q4 last year, the lowest USD composition since 1995, Q1 saw an increase to 57.1%. In nominal terms, the euro holdings in global reserves fell from 20.4% to 20.0% and yen holdings fell from 5.8% to 5.4%. The pound’s holdings were unchanged at 4.4% and the ‘other currencies’ portion was also unchanged at 10.8%. The USD holdings Q/Q increase was the first since the final quarter of 2024," MUFG notes.

"The US dollar did advance on a Q/Q basis in Q3 and Q4 of last year, but the gains were modest and buying of non-dollars by reserve managers were larger than the non-dollar negative valuation impact and hence USD reserve holdings declined. Looking at the Q1 2026 reserve changes after stripping out the FX valuation impact shows that for the euro, reserve managers were also outright sellers as the euro declined in value," MUFG adds.