According to new data released Thursday by the International Monetary Fund, the US dollar has maintained its dominance as the world’s most widely held reserve currency.
The dollar’s share of total allocated reserves was 59 percent in the first quarter of 2022, unchanged from the fourth quarter and slightly lower than the previous year’s share of 59.4 percent.
The Chinese yuan held 2.9 percent of global reserves, up from 2.8 percent in the fourth quarter and 2.5 percent a year ago. The British pound gained 5%, up from 4.8 percent in the previous quarter and 4.7 percent a year ago.
Meanwhile, the euro, the world’s second most widely held reserve currency, saw its share of the global total fall to 20% from 20.6 percent in the fourth quarter and 20.5 percent a year ago, from 20.6 percent in the fourth quarter and 20.5 percent a year ago. In addition, the Japanese yen’s share fell to 5.4 percent from 5.5 percent in the previous quarter and 5.9 percent a year ago.
The dollar has held its ground as the West froze Russian foreign exchange holdings following Vladimir Putin’s invasion of Ukraine. Concerns were raised that other countries would eventually reduce their exposure to the US dollar in order to avoid being subjected to similar sanctions in the future.
However, interest rate hikes by the Federal Reserve in response to persistent inflation have sent bond yields soaring, making the dollar more appealing to investors. In fact, earlier this year, the dollar reached a 20-year high against a global currency index.
Meanwhile, China has pushed the yuan to challenge the dollar’s dominance in global finance.
The People’s Bank of China recently announced that it is establishing a yuan reserve with the Bank for International Settlements and five other countries. Each member will contribute approximately 15 billion yuan ($2.2 billion).
In addition, more countries are utilizing the yuan in international trade. According to Reuters, India’s top cement producer is using Chinese currency to pay for a cargo of Russian coal.