Authors: Linda S. Goldberg and Oliver Zain Hannaoui
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Staff Reports
Drivers of Dollar Share in Foreign Exchange Reserves
Number 1087
March 2024 Revised February 2026
March 2024 Revised February 2026
JEL classification: F3, F31, F33
The share of U.S. dollar assets in the official foreign exchange reserve portfolios of central banks, at times, is taken as an indicator of the dollar’s global status. We provide a decomposition that shows two distinct channels contributing to the changes in the dollar share of reserves aggregated across countries: shifts in preferences for dollar assets and changes in reserve balances driven by countries whose portfolio allocations differ from the aggregate. We document how the concentrated nature of foreign exchange reserve holdings allows countries that contribute a large share of aggregated reserves to exert substantial influence on aggregate dollar shares over time, potentially dominating the narrative. In recent periods, the key contributors to changes in aggregate preference shifts for dollar assets are changes in bilateral country trade with the United States and dollar debt share, with geopolitics additionally working through the investment tranches of central bank portfolios. Diversification away from dollar assets is more prevalent conditional on official reserves of countries being large enough to satisfy country liquidity needs.
Author Disclosure Statement(s)
Linda Goldberg
The author declares that (s)he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Oliver Zain Hannaoui
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
The author declares that (s)he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Oliver Zain Hannaoui
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Suggested Citation:
Goldberg, Linda S. and Oliver Hannaoui. 2024. “Drivers of Dollar Share in Foreign Exchange Reserves.” Federal Reserve Bank of New York Staff Reports, no. 1087, revised February 2026. https://doi.org/10.59576/sr.1087
Goldberg, Linda S. and Oliver Hannaoui. 2024. “Drivers of Dollar Share in Foreign Exchange Reserves.” Federal Reserve Bank of New York Staff Reports, no. 1087, revised February 2026. https://doi.org/10.59576/sr.1087
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