Morgan Stanley: Dollar’s Share of Global Reserves Falls to 56%

A report by Morgan Stanley indicates that the U.S. dollar’s share of global foreign exchange reserves declined to 56% by the end of 2025, marking a drop of seven percentage points from its peak in 2016.

In contrast, gold has emerged as a major beneficiary of shifting reserve strategies, with its share rising sharply to 27%, an increase of roughly 20 percentage points. The surge has been driven largely by sustained central bank purchases and elevated global prices, reflecting a broader diversification trend among monetary authorities.

The report notes that gains among competing currencies have been relatively modest. The euro’s share increased by 1.3 percentage points, while the Japanese yen and Chinese renminbi rose by 1.8 and 1.0 percentage points, respectively.

Despite the decline in its reserve share, the dollar continues to demonstrate resilience across global markets. The trade-weighted U.S. dollar index rose by 5%, with cumulative gains reaching 15% by early 2025, underscoring its enduring strength in international trade and finance.

According to the report, the dollar remains dominant in global transactions, accounting for 96% of export invoicing and 47% of international payments, up from 32% in 2010. It also plays a central role in the growing stablecoin market, now valued at over $250 billion, further reinforcing demand for dollar-denominated assets, particularly short-term U.S. Treasury securities.

In global debt markets, approximately 60% of outstanding debt is denominated in dollars, representing a 20-percentage-point increase since the global financial crisis. Meanwhile, the euro’s share in this segment has declined from 35% to 26%.

The report concludes that while the dollar’s share of reserves has gradually declined, its overall global usage remains disproportionately high relative to the United States’ share of global GDP and trade. However, it also points to a gradual reduction in foreign holdings of U.S. Treasuries, which have fallen to 34%, signaling subtle shifts in global investment patterns.