The share of the US dollar in global foreign exchange reserves fell to its lowest level on record, while the share of the Chinese yuan increased, analysts at JPMorgan said.
The share of the dollar fell below 59% in the fourth quarter of 2021, before Western sanctions on Russia raised doubts about the reliability of access to the dollar. This is down from almost 62% at the start of 2020 and 65% in 2015. In addition, the rate of decline has accelerated in recent years.
The fall of the dollar is even more dramatic when you take into account the value of the currency. Bank analysts have found that the dollar’s recent strength is masking a sharper fall in its reserve status, a shift that appears to have intensified since the 2018 US trade war with China.
Analysts note that this trend signals a clear move towards more diversified foreign exchange assets, and it is possible that the current sanctions against the Russian central bank will exacerbate this effect in the future.
The euro, the second most widely traded currency, has seen a net decline over the past decade but has risen over the past three years, according to JPMorgan.
Most recently, offshore yuan prices experienced their biggest weekly drop against the dollar since 2015 as Beijing reintroduces strict restrictions to contain the coronavirus, while higher U.S. bond yields spur investors into dollars.
A spokesman for the Chinese Monetary Bureau said that despite the recent yuan volatility, the currency remains stable and will be able to withstand the upcoming changes in the policy of the US Federal Reserve towards higher rates.
