Central Banks USD Reserves Drop To New Lows As Dedollarization Continues

Banking giant JPMorgan has recently noted that the trend of de-dollarization is gaining momentum as central banks worldwide reduce their holdings of the United States Dollar (USD).

According to JPMorgan strategists Meera Chandan and Octavia Popescu, the portion of USD when it comes to the central banks and their foreign exchange reserves has reached a record low of 58%. They also highlight the increasing prominence of de-dollarization when considering the significant accumulation of gold by central banks in the past five years.

UBS, another prominent bank, also recently stated that central banks intend to acquire 700 metric tons of gold, equivalent to $48.74 billion, in 2023. This shift is driven by concerns over geopolitical issues and persistent inflation, leading countries to move away from relying on the USD.

JPMorgan analysts acknowledge the emergence of signs indicating de-dollarization. They anticipate that this trend will persist despite the USD having a substantial presence in global trade settlements.

Over the past few decades, both the USD and the Euro have maintained stable shares of 40% to 50% in trade invoicing. Additionally, the proportion of USD when it comes to foreign exchange trading volumes remains close to its all-time high of 88%.

Furthermore, JPMorgan analysts revealed that the USD continues to dominate SWIFT payments, accounting for 43% of transactions. In comparison, the Euro constitutes 32% of transactions, while the Chinese Yuan comprises 2.3%.