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Investing.com - Official foreign exchange reserves of U.S. dollars rose substantially in the first quarter despite the U.S. currency being under pressure, and Standard Chartered (LON:STAN) discusses.
The IMF’s Currency Composition of Official Foreign Exchange Reserves (COFER) data for the first quarter, released on July 9, showed a headline increase of $168 billion in total allocated reserves globally.
Of this, $90 billion (c.54%) was in U.S. dollars, but because the greenback fell broadly in the opening quarter of 2025, the dollar value of non-dollar reserves automatically rose. If the U.S. dollar fell by 5% against the euro in the quarter, the dollar value of reserves held in euros would go up by 5% even if no reserve transactions occurred.
However, why would reserve managers buy USD when it is under pressure?
During past episodes of dollar pressure, U.S. dollar accumulation by global reserve managers seemed intended to prevent even sharper appreciation in their local currencies versus dollars, said analysts at Standard Chartered, in a note dated July 9.
However, there are alternative explanations. Reserve managers may have been buying dollars when it was cheap. They may also have felt a need to accumulate USD reserves in anticipation of asset-market turbulence ahead,” said Standard Chartered.
However, there is a big caveat – the IMF data show changes of more than 30% in holdings of AUD and CHF reserves, the bank added.
“These are very large, and we would not be surprised if they are revised. We would treat the COFER data cautiously, and would want to be confident in all of the reserve numbers before drawing strong conclusions.”