The USD reserve currency status continues to slide, hitting a thirty-year low, despite USD rising sharply against a basket of other currencies.
Dollar Index DXY, a measure of the value of the dollar relative to a basket of foreign currencies, is moving near a 52-week high, at 109.1, at the time of writing. But the DXY still remains below the 2022 high, well below the 2001 high, and significantly below the 1985 high.
As Darren Winters points out, if this downward trajectory of USD reserve currency continues, the dollar could fall below the critical 50% share of global reserves by 2034, according to forecasts.
USD reserve currency status continues sliding amongst a basket of reserve currencies held by central banks
The share of US dollars held by central banks has steadily declined over several years as they diversify their holding into other currencies.
The euro comes a distant second, which has been approximately 20% of the share of global reserves for years.
Alternative stores of wealth, particularly precious metals, gold, are slowly chipping away at USD reserve currency status.

According to the IMF, central bank gold holdings have surged over this decade to 1.16 billion troy ounces – roughly $3.08 trillion, compared to $12.3 trillion in foreign exchange reserves.
Gold bullion appears on the balance sheet as a reserve asset and not a foreign exchange reserve of central banks since it does not entail foreign currency.
For decades, central banks have been unloading their gold holdings.
But that trend changed towards the end of the Euro Sovereign Debt Crisis in 2015 when it became apparent that central banks were debasing their currencies, creating more of it to finance the spiralling public deficits. So, over the last decade, central banks hedged their fiat debt system by accelerating their buying of gold over the decade.
Based on the readily available reported data, central banks bought a net 53t in November. The National Bank of Poland (21t) was the biggest buyer, while the People Bank of China reported its first addition of 5t since April, according to a piece in the World Gold Council WGC, entitled, “Central Banks to continue their great gold grab in November.”
“November represented another solid month of gold buying as central banks collectively added a net 53t to global official holdings based on available reported data,” wrote the WGC.
Net purchases heavily outweighed net sales in 2024. So when gold prices fall, you now know who is on the other side of the trade buying
USD reserve currency status, while sliding, remains the dominant currency by a wide margin
Below is IMF data for 2024 for the major currencies’ share of global reserves.
USD-denominated foreign exchange reserves are still at 57.4% of total exchange reserves.
The euro came a distant second at 20%, and then the Japanese Yen 5.8%.
The British pound GBP came third at 5.0%.
Other currencies’ combined share stood at 4.5%. The Canadian dollar at 2.7%, the Chinese renminbi at 2.2% and the Swiss franc at 0.2%.
Moreover, most major foreign currencies have flatlined against the USD share over the past decade. A few have increased by about 1%, with the Japanese Yen increasing its share by around 2%.
Is the USD reserve currency status slide to a 30-year low a unique problem for our age?
Darren Winters explains that the dollar share was below 50% in 1990 and 1991, at the final leg of its long plunge from a share of 85% in 1977 to 46% in 1991.
Inflation was the cause in both cases, where the dollar lost most of its share.
During the 70s stagflation, a period of high inflation, high unemployment, and slow economic growth, global investors lost confidence in the ability or willingness of the Fed to get inflation under control.
But by the 1990s, central banks loaded up on dollar-assets again until the euro came along.
So the reserve currency status share of global reserves has fluctuated over the decades, falling below 50% and then bouncing back up again.
Could USD reserve currency status reverse its three-decade decline?
A phrase used in financial markets to describe the US dollar is “the cleanest shirt in the dirty laundry.”
In other words, it is the cleanest option among other dirtier options.
The US national debt to GDP ratio of 123% gets a lot of attention, but what about Japan’s debt to GDP of 232%, Venezuela’s 241%, Greece’s 173%, Singapore’s 168% or Italy’s 142% in 2024?
The USD continues to play a major role in global trade, bearing in mind as of 2022, the dollar was used in 54% of foreign trade invoices globally.
The next largest share is the EURO at a distant 20%.
From the DXY Index, the dollar exchange value has appreciated in value, in comparison with a basket of other currencies.
The current yields on treasury bonds could drive USD demand
At some point, when investors believe inflation is under control, there could be a rush into treasury bonds. A rotation of capital from gold into treasuries could be on the cards as investors lock in attractive bond yields. The opportunity cost of holding gold, which has been eating away at USD reserve currency status, could become too high.
So, if that scenario plays out in 2025, that could be the catalyst for a reversing trend in the decline of USD reserve currency status. Gold shines, but for how long.
“The recent 30-year sale gets an A on every matrix, with a sold bid. We are now over the hump of supply. But I do not think upside pressure in yields is over by a long shot,” said Rick Santelli on the latest news in the bond market.
Central banks are not dumping treasury bonds.
Holdings of US Treasury securities by foreign central banks and other foreign holders have surged from record to record. Over the past 12 months, foreign holders added $880 billion, bringing their stash to a record $8.67 trillion, according to the Treasury Department TIC data.