The relative weight of the dollar in the reserves of the central banks remained stable when adjusting to exchange fluctuations. As explained by the IMF, the effects of the exchange rate promoted almost the entire decrease in the participation of the US currency in currency reserves.
In recent times there has been a lot of talk about the change in the composition of international foreign exchange reserves of the world’s central banks, especially, to the detriment of the dollar from the pandemic. However, The latest data from the International Monetary Fund (IMF) seem to show that the dollar remains afloat.
It is worth noting that the IMF relieves the monetary composition of international foreign exchange reserves deposited in the central banks in different currencies, such as the dollar, the euro, the Japanese yen, the Chinese renminbi, the sterling pound and others. The data are based on voluntary and confidential reports of 149 economies that opt in the so -called Cofer, “Currency Composition of Official Foreign Exchange Reserves.”
But when drawing conclusions, a crucial detail is usually overlooked, which is that The shares are declared in US dollars. This means that, if a country maintains reservations in euros or yen, the value of these reserves first becomes dollars before adding to global totals, organism economists explain G. Kwende, E. Sobrino, and C. Sánchez-Muñoz. Therefore, when exchange rates fluctuate, even if no central bank buys or sells anything, the declared shares vary. This is relevant because so far from 2025 there were notable modifications in exchange rates. It is worth mentioning that the same can happen with fluctuations in interest rates, but the impact on monetary shares, according to the fund officials, was relatively small in the second quarter.
What happened to the exchange rates this year?
According to the DXY index, a reference for the performance of the dollar against the euro and the coins of Japan, the United Kingdom, Canada, Sweden and Switzerland, fell more than 10% in the first half of the year, its largest fall since 1973. On the one hand, the dollar depreciated 7.9% against the euro in the second quarter and 10.6% in the first half. While against the Swiss Franco, 9.6% fell in the second quarter and more than 11% in the first six months, their worst performance in a first half in front of the Franco in more than a decade.
“This means that even if the central banks did not make changes in their wallets, the value of their holdings in coins other than the dollar (when they are expressed in dollars) would increase, which would result in a corresponding decrease in the proportion of holdings in dollars”warn Kwende, nephew and Sánchez-Muñoz.
At first glance, the gross data of the COFER suggest a drop in the participation of the dollar in the reserves assigned to 56.32% at the end of the second quarter, compared to 57.79% at the close of the first quarter, which represents a decrease of 1.47 percentage points. However, by maintaining constant exchange rates, their participation would have decreased only slightly, to 57.67%, they explain. In this sense, IMF data show that exchange fluctuations explain 92% of the reduction of dollar participation during the second quarter; And similar exchange effects are observed in other currencies, including the euro, the second world reserve currency.
Dollar, euro and pound sterling
On the other hand, the proportion of claims in euros seems to have increased to 21.13% in the second quarter, from 20% of the previous three months, which represents an increase of 1.13 percentage points. However, economists of the fund explain, the valuation effects were responsible for 1.17 percentage points of this decrease, rather than fluctuation itself. “If the exchange rates had been stable, the proportion of the euro would have fallen 0.04 percentage points, to 19.96% in the second quarter. In this case, the assessment effect hides the direction of the underlying change of the currency. Similarly, in the case of sterling pound, the effect effect hides the direction of change: the proportion seems to have risen when, maintaining constant exchange rates, in reality it would have dropped, ”they argue.
Why does the background give so much importance to this issue? It happens that, in a dynamic global panorama, calculating reserves data correctly is more crucial than ever. Because Cofer figures adjusted to the exchange rate offer a more nuanced vision of how central banks manage their portfolios and what this implies for the global financial system. Therefore, The most recent reserves data, once adjusted to the exchange rate fluctuations, suggest that the proportion of dollars in the reserves of the central banks has not decreased as much as initially indicated by the non -adjusting figures.
Source: Ambito
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