De-Dollarization Now Evident As Central Banks US Dollar Reserves Drop to Record Lows: JPMorgan

Financial behemoth JPMorgan says the trend of de-dollarization is gaining steam as central banks around the world unload their US dollar holdings.

In a new Reuters report, JPMorgan strategists Meera Chandan and Octavia Popescu say that the dollar’s share in central banks’ foreign exchange reserves has dipped to 58%, a record low. 

JPMorgan analysts also say that the trend of do-dollarization becomes more evident when accounting for the fact that central banks have been heavily accumulating gold over the last five years.

Chandan and Popescu say that in half a decade, gold’s share in reserves has risen from 11% to 15%.

Last month, banking giant UBS said that central banks plan to accumulate 700 metric tons of gold worth $48.74 billion this year as countries shy away from the US dollar due to geopolitical concerns and persistent inflation.

Say JPMorgan analysts,

“Some signs of de-dollarization are emerging.” 

Chandan and Popescu add that the de-dollarization trend is likely to continue even though the US dollar is managing to maintain its “large footprint” in the settlement of global trade.

According to the bank’s strategists, the dollar and the euro’s share in trade invoicing have remained stable over the past decades at 40% to 50%. Meanwhile, the dollar’s share in foreign exchange trading volumes is close to its all-time high of 88%.

The analysts also reveal that the dollar continues to dominate SWIFT payments at 43%. In comparison, the euro accounts for 32%, and the Chinese yuan at 2.3%.

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