When Did the Dollar's Reserve Share Fall? Valuation Effects and the Timing of Reserve Reallocation, 2000–2026

Abstract

Claims about de-dollarization draw their evidence from three international functions of a currency, unit of account, medium of exchange and store of value, which rest on different mechanisms and need not move together. This paper separates them and asks in which capacity the dollar’s position has changed, when, and how the quantity of dollar assets the world holds has moved relative to the price it pays to hold them. The invoicing and settlement legs use published indicators. The store-of-value leg extends the constant-currency revaluation of Arslanalp et al. (2022) by seventeen quarters, to 2026Q1, on the revised IMF COFER series with quarter-end FRED exchange rates, computed on 2000Q1, 2021Q4 and moving quarter-on-quarter bases. The adjustment is partial: four of the seven reported currencies are revalued. The indicators show continuing prominence in the first two. In the third, the dollar’s share of reserves falls 13.67 percentage points across the window and 13.89 at constant 2000Q1 rates, so valuation has masked the decline rather than produced it. The published series nonetheless mistimes it. The gap between the two series is positive in every quarter from 2002Q4 to 2016Q3: the published share fell from 2002 to 2008 while the constant-currency share rose, and stayed flat from 2008 to 2014 while the constant-currency share fell. Quarter by quarter, the valuation effect exceeds the entire published change in 64 of 104 quarters. Readers of COFER should treat a quarterly change in the published share as evidence about the exchange rate until valuation is removed.