US dollar share of FX reserves steady in Q1, euro share dips, says IMF

NEW YORK: The US dollar’s share of currency reserves reported to the International Monetary Fund was 58.8% in the first quarter, unchanged from that of the last three months of 2021, IMF data showed on Thursday.

The greenback remains the largest-held currency reserve by global central banks.

The euro’s share, however, slipped to 20% in the first quarter from 20.6% in the previous three months. In 2009, the euro hit its highest share at 28%.

Global reserves, which are reported in US dollars, are assets of central banks held in different currencies used primarily to support their liabilities. Central banks sometimes use reserves to help support their respective currencies.

“The (IMF) data is not a major surprise after what happened in Ukraine... The dollar only got stronger and the euro got weaker, and I suspect those trends will not change much in the near term,” said Kenneth Broux, an FX strategist at Societe Generale in London.

The dollar index rose 2.7% in the first quarter, bolstered by the Federal Reserve’s monetary policy tightening. So far this year, the greenback has surged 10% against a basket of major currencies.

The US central bank raised its benchmark overnight interest rate by a quarter of a percentage point at its policy meeting in March, following up with a 50-basis-point rate increase at its May meeting.

The Fed, however, raised rates by a hefty 75 basis points at its policy meeting earlier this month to stem a disruptive surge in inflation. It also projected a slowing economy and rising unemployment in the months to come.

The IMF data showed the Chinese yuan’s share of currency reserves at 2.8% in the first quarter, largely unchanged from the fourth quarter of last year. In absolute terms, however, central bank holdings of the yuan dipped 0.2% to $336.39 billion. The IMF started tracking the yuan’s share in 2017.

Against the US dollar, the Chinese yuan slipped 0.2% in the first three months of this year, but it was down 5.3% since the beginning of 2022.

The yen’s share of currency reserves was 5.3% compared to 5.5% in the last quarter. But in dollar terms, yen reserves fell nearly 6% to $625.68 billion.

IMF data also showed global reserves slid to $12.55 trillion in the first quarter from a record $12.92 trillion in the last three months of 2021.