Context of Recent Dollar Weakness
Since early in President Trump’s second term, the U.S. dollar has dropped sharply on a trade-weighted basis, with steep moves in April 2025 and January 2026, raising questions about its global roles.
Reserve Currency Reality
Despite the recent declines, officials reserve managers continue allocating large shares of reserves to the dollar, suggesting confidence remains durable.
Role of IMF Data
Surveys of official foreign exchange reserves show little evidence that managers are abandoning the dollar in favor of other major currencies.
Valuation Effects vs. Allocation Changes
Apparent drops in dollar reserve allocations often reflect currency valuation swings rather than actual shafts in reserve manager behavior.
Euro and Yuan Dynamics
The euro has not made significant gains despite policy turmoil, while the Chinese yuan has seen slight allocation declines, suggesting limited appetite for alternatives.
Smaller Currencies Gaining at the Margins
Some reserve diversification is occurring into smaller currencies, but these shifts are modest and not indicative of a major shift away from the dollar.
High Hurdle for Status Erosion
Meaningful erosion of the dollar’s reserve currency status appears unlikely soon due to lack of viable substitutes and continued global preference for dollar assets.
Source:
Brooks, R. (2026, febrero 26). Is the US dollar’s reserve currency status eroding? Brookings Institution. https://www.brookings.edu/articles/is-the-us-dollars-reserve-currency-status-eroding/