Düsseldorf, 15 April 2025
Insight EU is actively exploring and training the capabilities of AI models by engaging them with data-driven questions of contemporary relevance. This analysis was conducted using the “Deep Research / Deep Think” mode across five different models. While the initial prompt was identical for all, the interactions and outcomes varied significantly.
We are publishing the results as part of an ongoing series of reports. Readers should note that the data may contain inaccuracies, and the findings should not be interpreted as investment advice. As we will be repeating this research monthly, we aim to track how these issues and insights evolve over time.
Part I: Perplexity’s findings
The US dollar maintains its dominant position in global foreign exchange reserves despite ongoing discussions about de-dollarization. The latest data from international financial institutions reveal significant trends in reserve composition and emerging challenges to dollar hegemony.
Global USD Currency Reserves by Central Banks and Sovereign Wealth Funds
The International Monetary Fund’s Currency Composition of Official Foreign Exchange Reserves (COFER) survey provides the most authoritative picture of global reserve holdings. According to the most recent data, total global foreign exchange reserves decreased to $12.36 trillion in 2024Q4 from $12.75 trillion in 2024Q3, primarily due to the depreciation of reserve currencies against the US dollar 1. Despite this overall decrease, the US dollar’s share in allocated reserves actually increased to 57.80 percent from 57.30 percent in the previous quarter 1.
The Atlantic Council confirms this dominance, noting that “the dollar represents 58 percent of foreign reserve holdings worldwide” while “the euro, the second-most-used currency, accounts for only 20 percent of foreign reserve holdings” 2. This data establishes that nearly six out of every ten dollars held in official reserves worldwide are denominated in USD.
Key Central Bank Holdings
Major economies maintain substantial foreign exchange reserves, with varying proportions allocated to the US dollar:
- China: China holds the world’s largest foreign exchange reserves, totaling $3.2024 trillion as of December 2024, after a reduction of 1.94% ($63.5 billion) during that month 9. While the exact USD component isn’t specified, China’s central bank attributes the reduction to “a combination of factors, including an increase in the dollar index, a decrease in global prices for financial assets, macroeconomic conditions, and expectations regarding the monetary policies of major central banks” 9.
- Japan: Japan’s reserve assets totaled $1,230,715 million as of December 2024, with foreign currency reserves comprising $1,077,137 million of this total 5. Securities valued at $917,567 million form the largest component of these currency reserves 5.
- India: India’s foreign exchange reserves stood at $676.3 billion as of April 4, 2025, showing robust growth by increasing $10.9 billion in a single reporting week 8. According to Reserve Bank of India Governor Sanjay Malhotra, these reserves provide approximately 11 months of import coverage 8.
- Russia: Russia’s foreign exchange reserves measured $387.1 billion in February 2025, showing a slight increase from $386.4 billion in January 7. This is significantly below Russia’s all-time high of $582.3 billion reached in July 2008 7.
- Brazil: Brazil’s international reserves decreased substantially by $33.3 billion in December 2024, bringing the total to $329.7 billion 6. This reduction was largely attributed to currency interventions conducted by Brazil’s Central Bank, which held nine spot dollar auctions and five “line” auctions totaling $32.574 billion in December alone 6.
- South Africa: South Africa held foreign exchange reserves of $47.9 billion in January 2025, slightly down from $48.3 billion in December 2024 10.
- United States: The US maintains relatively modest foreign exchange reserves compared to other major economies, with $35,598 million as of February 2025 3.
Major Sovereign Wealth Funds
Several sovereign wealth funds maintain significant reserves that play an important role in global financial stability:
- Norway: The Norway Sovereign Wealth Fund (officially called the Government Pension Fund of Norway) is the fourth-largest global sovereign wealth fund, with an impressive $1.63 trillion under management 13. This fund is particularly remarkable given Norway’s population of just 5.4 million people.
- Saudi Arabia: Saudi Arabia held foreign exchange reserves of $410.2 billion in January 2025, down slightly from $413.0 billion in the previous month 12. These reserves offer substantial coverage, equivalent to 21.4 months of imports as of December 202412.
- Qatar: Qatar’s foreign exchange reserves were measured at $42.4 billion in January 2025, compared to $43.2 billion in December 2024 11. These reserves provide approximately 12.3 months of import coverage 11.
BRICS Stance on USD in International Trade
The BRICS alliance has been vocal about reducing dependence on the US dollar, though recent reports suggest division within the group over implementation. According to current analysis, “The BRICS alliance is divided on the idea of replacing the US dollar with local currencies for trade and transactions” 14. While de-dollarization remains a stated goal, practical challenges and divergent national interests have hampered unified action.
There appears to be a spectrum of commitment among BRICS members:
- “Countries such as India, Brazil, South Africa, and the UAE are slowly going soft on the idea of de-dollarization” 14. This reluctance is reportedly connected to concerns about the impact of high tariffs on their import and export sectors.
- “Only countries such as China, Russia, and Iran are aggressively pursuing the de-dollarization agenda globally” 14. Russia and Iran’s enthusiasm likely stems from their experience with international sanctions, while China may have broader strategic goals.
- India, in particular, appears to have reservations about China’s leadership in this area, with reports suggesting “India believes that China is using BRICS as a pawn to make the Chinese yuan race ahead of the US dollar” 14.
The current geopolitical climate, including tariff policies, appears to be affecting these de-dollarization efforts: “Looking at how the alliance is divided on USD replacement, the de-dollarization agenda might fall flat during Trump’s era” 14. This suggests that external economic pressures are influencing BRICS countries’ willingness to move away from the dollar system.
Development of Alternative Assets in Global Currency Reserves
While the US dollar maintains its dominant position, several other currencies and assets play important roles in global reserves:
Euro: The euro continues to be the second most important reserve currency, though its share has seen slight declines. According to the IMF’s COFER data, “The share of euro holdings in the allocated reserves decreased to 19.83 percent from 20.03 percent in 2024Q3” 1. Together with the US dollar, the euro forms nearly 80% of global foreign exchange reserves 2.
Chinese Renminbi (Yuan): The Chinese renminbi’s role in global reserves remains relatively minor despite China’s economic significance. The IMF reports that “The share of Chinese renminbi holdings in the allocated reserves was 2.18—unchanged from the previous quarter” 1. This suggests that despite China’s efforts to internationalize its currency, progress has been incremental.
Other Currencies and Assets: The remaining currencies in global reserves have also seen slight declines. “The share of other currencies in the allocated reserves (i.e., those excluding the US dollar, the euro, and the renminbi) decreased to 20.19 percent in 2024Q4 from 20.50 percent in 2024Q3, which was mainly attributed to their depreciation against the US dollar” 1.
Gold continues to play an important role in reserves for many countries. For example, Japan reported gold reserves valued at $71,013 million as of December 2024 5.
Global USD Volume Compared to BTC
The scale difference between USD reserves and Bitcoin is substantial. Based on the IMF data, with global foreign exchange reserves at approximately $12.36 trillion and the US dollar comprising about 58% of these reserves, roughly $7.2 trillion is held in USD reserves by central banks alone 12. This figure doesn’t include the much larger volumes of USD in circulation through commercial banking systems and private holdings.
While the search results don’t provide direct Bitcoin market capitalization figures for comparison, it’s worth noting that Bitcoin has shown a “0.94 correlation with global liquidity over the long term” 15, suggesting its price movements are closely tied to broader monetary conditions. “Bitcoin’s price closely follows global liquidity trends. The logic is straightforward: when there is more money available, asset prices tend to rise” 15.
Global money supply data indicates that major central banks (including the Federal Reserve, European Central Bank, People’s Bank of China, and Bank of Japan) significantly influence both traditional and cryptocurrency markets. The current global M2 money supply is approximately $107 trillion, with projections suggesting it could increase to over $127 trillion during 2025 20.
USD in China’s Reserves vs. CNY in U.S. Reserves
The exact composition of China’s foreign exchange reserves by currency is not publicly disclosed in detail, making it difficult to determine precisely what percentage of China’s $3.2024 trillion in reserves is held in USD 9. However, analysts widely believe that a significant portion is denominated in US dollars.
Conversely, the United States holds relatively modest foreign exchange reserves of $35,598 million 3. The composition of these reserves is not specified in the search results, but historically, the US has held minimal amounts of Chinese yuan in its official reserves.
This asymmetry reflects the different roles these currencies play in the international monetary system. The US dollar functions as the world’s primary reserve currency, while the Chinese yuan is still working to establish itself as an international currency despite being the currency of the world’s second-largest economy.
Conclusion
The US dollar continues to maintain its dominant position as the world’s primary reserve currency, with approximately 58% of global foreign exchange reserves denominated in USD. This persistence occurs despite ongoing discussions about de-dollarization, particularly among BRICS nations. However, these efforts appear fragmented, with only some members actively pursuing alternatives to the dollar system.
While alternative assets like the euro, yuan, and gold play important roles in reserves, none currently challenges the dollar’s primacy. The substantial gap between the scale of USD in the global financial system and alternatives like Bitcoin highlights the entrenched nature of dollar dominance.
Central banks and sovereign wealth funds continue to hold significant USD reserves, though their management strategies are evolving in response to changing global economic conditions. This evolving landscape suggests that while the dollar’s safe haven status remains intact, the international monetary system continues to adapt to new economic and geopolitical realities.
Source – Perplexity, prompted by Insight EU