The global share of US-dollar-denominated foreign exchange reserves fell by 40 basis points from Q3 to 58.8% in Q4, setting a new 26-year low, edging out the low in Q4 2020, according to the IMF’s COFER data released at the end of March. Dollar-denominated foreign exchange reserves consist of Treasury securities, US corporate bonds, US mortgage-backed securities, and other USD-denominated assets that are held by foreign central banks and other foreign official institutions.

The US dollar’s role as the dominant global reserve currency has enabled the US to run its gigantic twin-deficits without getting its feathers ruffled: The US government’s incredibly spiking public debt, now over $30 trillion; and the ballooning trade deficit, engineered by Corporate America’s 30-year search of cheap.

But having the dominant reserve currency enables and encourages the US to run up its twin deficits, without much of a price to pay.

Update on US Dollar as Global Reserve Currency and the Impact of USD Exchange Rates & Inflation | Wolf Street