Synopsis:
SocGen highlights a surprising trend in the ongoing de-dollarization process: while the USD’s share in global FX reserves has continued to decline, major reserve currencies like the EUR, GBP, JPY, and CNY have not benefited. Instead, the gains have gone to gold and a diverse mix of smaller, mostly Asian and Nordic currencies.
Key Points:
USD Share Falls Below 50%:
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Since Q3 2023, the USD’s share of global FX reserves has dropped by 5.8%, falling below the 50% threshold.
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This marks a continuation of the de-dollarization trend that paused during the COVID crisis but resumed in late 2023.
Gold as the Main Beneficiary:
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Gold holdings rose by 7.9% to 23.3% of total global reserves.
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Central banks are clearly turning to gold as a preferred diversification tool amid heightened geopolitical and inflation uncertainty.
Major Reserve Currencies See Decline:
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The EUR, GBP, JPY, and CNY all saw their respective shares decline in the same period.
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This indicates that traditional reserve alternatives to the USD are not seen as attractive or stable enough in the current macro environment.
Rise of 'Other' Currencies:
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The ‘Others’ category in the IMF’s reserve classification—likely including Asian and Nordic currencies—has seen a rise.
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These currencies may be perceived as safer or more neutral amid rising geopolitical fragmentation.
Conclusion:
SocGen notes that the global push to diversify away from the USD is not benefiting traditional major currencies. Instead, gold and select smaller currencies are attracting reserve flows, highlighting a broader shift in the global reserve architecture. This reflects a diversification strategy focused on neutrality and risk mitigation rather than a reallocation toward existing reserve heavyweights.
