Is the US Dollar Still the World’s Number One Currency?

By: Anneken Tappe · June 24, 2024 · Reading Time: 2 minutes

The U.S. dollar has been the world’s reserve currency for a very long time. It has been 80 years, to be exact, since the 1944 Bretton Woods Conference in idyllic New Hampshire, where 44 countries agreed the creation of the International Monetary Fund and the World Bank.

In practical terms this means that the dollar is the standard currency for a lot of international trade and contracts, and that central banks around the world hold dollars in their accounts for a rainy day. But there’s some change in the air.

Reserve Shift

Other currencies have been playing catch-up to the dollar: The euro and China’s yuan are getting increasingly popular as reserve currencies, in many ways because central banks also like to diversify their portfolios.

The dollar is still very clearly in pole position, representing just under 60% of global reserves, down from more than 70% some twenty years ago, and the euro at a distant second of about 20%, per data from the IMF.

The IMF data also shows that the falling share of U.S. dollar reserves is not actually being offset by other major currencies, but rather gold, as well as other nontraditional reserves like the Australian and Canadian dollar. According to a June survey by the World Gold Council, nearly a third of 70 central bank respondents intend to increase their gold holdings over the next 12 months, primarily to hedge against inflation and U.S. dollar exposure.

Dollar Dominance

Part of the dollar’s appeal as a reserve currency is the strength and stability of the U.S. economy. Even in the face of the pandemic-era woes, including spiking inflation and resurfacing worries about the economic outlook, the U.S. economy remains pretty healthy overall.

For Americans, the benefits of having the dollar be the world’s main reserve currency aren’t obvious in their day to day. Rather, many take them for granted: The dollar is liquid and stable, meaning we can use it to reliably buy things for more or less stable prices (even in the current inflationary environment). In theory, the dollar’s reserve status also means lower borrowing costs in the U.S. That’s because borrowing costs are determined by Treasury bond yields, which are in turn determined by demand, including from buyers like foreign central banks.

The dollar’s reserve dominance isn’t going anywhere anytime soon, but it’s worth keeping an eye on what the world is holding in its portfolio.

Looking for more stories like this? Check out On the Money — SoFi’s one-stop-shop for news, trends, and tips!

Check it out

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.

Communication of SoFi Wealth LLC an SEC Registered Investment Advisor

SoFi isn't recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.


TLS 1.2 Encrypted
Equal Housing Lender