ECB Cuts Dollar Holdings, Shifts Proceeds Into Yen

The European Central Bank (ECB) sold part of its US dollar-denominated assets early last year, trimming the greenback’s weight in its foreign-exchange reserves in what it described as a routine portfolio rebalancing move.

The adjustment took place before market volatility surged following US President Donald Trump’s announcement of new tariffs in April. The ECB downplayed the significance of the transaction, framing it as a technical realignment rather than a policy signal.

The ECB booked a gain of €909 million ($1.07 billion) from the transaction executed in the first quarter, according to financial statements released Thursday. The central bank said it reinvested the entire proceeds into Japanese yen-denominated assets.

In the first quarter of 2025, the ECB sold a small portion of its dollar holdings and fully reinvested the proceeds into yen to better align reserve composition with its target allocation.

While the bank did not disclose the size of the transaction, its data showed dollar holdings declining to $50.9 billion from $51.9 billion. Yen holdings rose to ¥2.1 trillion from ¥1.5 trillion.

Measured in euro terms, the dollar’s share of foreign-exchange reserves fell to 78%, down from 83% a year earlier. Part of that decline likely reflects the depreciation of the US currency. The data also indicated a rise in the share of cash within overall reserves.

Most international reserves in the euro area are held by national central banks rather than directly by the ECB.

For the full year, the ECB posted another financial loss but signaled a potential return to profitability either this year or next.

The central bank recorded a €1.3 billion loss in 2025, narrowing sharply from a €7.9 billion loss the previous year. It currently carries accumulated losses of €10.5 billion, having fully depleted its provisions.

Even if profitability resumes this year, rebuilding buffers and offsetting past losses could take several years, potentially stretching into the next decade before dividend distributions are reinstated.

The ongoing losses underscore the long-term financial impact of nearly a decade of monetary stimulus programs before and during the Covid-19 pandemic. Many of the bonds purchased under quantitative easing remain on the ECB’s balance sheet.

As interest rates surged, the central bank has been required to pay substantial interest on excess liquidity in the financial system, which still stands at roughly €2.4 trillion.

The ECB itself holds only a limited portion of bonds acquired under asset-purchase programs, with national central banks bearing the majority of holdings. The heaviest losses have been reported by Germany’s central bank, as well as those of the Netherlands and Belgium.