According to a report from Eurizon SLJ Asset Management, the percentage of reserves held in U.S. dollars by central banks fell to less than half of the global total in 2022. This marks a sharp decline from 2021, when dollars represented 55% of the reserves held. Analysts explain that this decline is due to the recent sanctions enacted by the U.S. against the Bank of Russia, eroding trust in the dollar as a reserve currency.
The report notes that the U.S. government's "weaponization" of sanctions has caused other countries to be less willing to hold their reserves in the form of U.S. dollars. This has led to a de-dollarization trend, with global blocs such as BRICS and ASEAN looking for alternatives to safely conduct trade amongst themselves. In fact, BRICS is currently studying an initiative for creating a common currency, and ASEAN countries have called for reducing reliance on the dollar.
This trend is reflected in the increasing gold holdings of countries, while dropping their foreign currency reserves. The Russian Deputy Minister of Foreign Affairs, Alexander Pankin, noted that more and more countries were adopting this trend, and the dollar was becoming toxic for everyday operations. While this is not yet a mainstream trend, it may become one in the future. As central banks continue to diversify their reserves away from the U.S. dollar, it remains to be seen how this will impact the global economy.
