US dollar retains global reserve dominance despite gradual decline

The United States dollar remains the world’s leading reserve currency, but its share of global foreign‑exchange reserves has fallen from about 57 % in 2016 to roughly 40 % by the end of 2025. The euro is the second‑largest reserve asset, holding around 14 % of reserves, while other currencies and gold are slowly gaining ground. The dollar’s dominance continues to give the United States strategic financial advantages, as most international trade—including oil transactions—and the majority of foreign‑exchange market activity are conducted in dollars.

Beyond official reserves, the dollar functions as an unofficial local currency in many economies where national money is eroding. In places such as Zimbabwe, Lebanon, Venezuela and Syria, people increasingly save, price goods and conduct everyday transactions in dollars, a process described as informal “dollarisation.” Roughly 60 % of all US banknotes are held outside the United States, and the dollar accounts for 58‑59 % of global FX reserves and 88‑90 % of FX transactions. Sanctions and economic instability in several countries further boost demand for the hard currency. Meanwhile, nations like China and Russia have expanded their gold holdings, adding another layer to the evolving store‑of‑value landscape.