Are global reserves moving away from the dollar?

The share of dollars has been declining, but not consistently across countries. Some have increased their dollar share while others have reduced their dollar exposure. In a NY Fed blog posting, “Are Central Banks Moving Out of Dollar Assets?” the authors try to disentangle the problem through two channels. One is the preference channel, which represents a change in the desire to hold a specific currency. For example, it can be a desire to hold fewer dollars. The second channel is the reserve change channel, which represents a change in the overall amount of reserves held. If a central bank has less dollar exposure but increases its overall reserves, overall dollars held will decline when central bank data is aggregated. 

What is clear is that the change in preferences has centered on a limited number of large central banks and does not represent a shift in behavior across all reserve holders. Second, some of the decline in the dollar share of foreign reserves is caused by large reserve holders that have had a lower allocation of dollars but have seen an increase in overall reserves. 

In conclusion, dollars as a percent of all reserves have declined over the recent reporting period, but the reasons for the decline suggest it is not a wholesale rebalancing of dollar exposure.