NewsRescue
According to the most recent International Monetary Fund data, countries throughout the world are diversifying away from the greenback at a rapid pace.
According to the Washington-based organization’s data, the dollar’s proportion of official gold and foreign currency reserves fell to an almost three-decade low of 58% in the fourth quarter of 2022.
According to reports, the dollar’s share of central banks’ foreign reserves has virtually fallen to levels last seen in 1995.
The dollar’s long-held position as the world’s main currency has steadily eroded in recent years, owing to concerns about rising US debt and widely implemented sanctions that use the currency as leverage.
According to Stephen Jen, CEO of Eurizon SLJ Capital Limited, as quoted by Reuters, the shift was more dramatic when corrected for exchange rates.
“What happened in 2022 was a very sharp plummeting in the dollar share in real terms,” he explained, blaming the drop on the freezing of half of Russia’s $640 billion in gold and foreign currency reserves.
According to Jen, the extreme measure prompted countries such as Saudi Arabia, China, India, and Turkey to reconsider diversifying their reserves to other currencies.
According to the Bank for International Settlements (BIS), the yuan’s proportion of worldwide over-the-counter forex transactions has climbed from almost zero to 7% in the last 15 years.
Following the move against Russia, other countries are asking, “What if you fall on the wrong side of sanctions?” Geoffrey Yu, a strategist at BNY Mellon, told the press.
He stated that global central banks are currently looking to diversify their holdings by purchasing corporate debt, tangible assets such as real estate, and foreign currencies.
“This is the process that is currently underway,” Toscafund Hong Kong managing director Mark Tinker told the agency. “The dollar is going to be used less in the global system.”