Evolution from 1995 to 2024 – IMF COFER Data

Key Trends

The US dollar remains the dominant reserve currency but has seen its share decline from a peak of 71.1% in 2000 to 57.8% in 2024. The euro has emerged as the second-largest
reserve currency since its introduction in 1999, while the Chinese yuan made its debut in recent years, reflecting China’s growing economic influence.

Current Debates: Can the Euro Challenge Dollar Dominance?

Recent questions about the US dollar’s safe haven status have intensified discussions about whether the euro is positioned to become the preferred currency for reserve holdings by central banks. The dollar has faced unprecedented challenges in 2025, with Trump’s tariff policies causing widespread uncertainty and threatening its traditional safe haven role, leading to unusual instances where the dollar weakened even as US bond yields rose. European Central Bank officials have seized on this opportunity, with ECB Executive Board member Isabel Schnabel stating that the euro area could become a safe haven as Trump’s policies take hold, describing it as “a historical opportunity to foster the international role of the euro”.

ECB President Christine Lagarde has argued that the current “fracturing” of the US-led global order could “open the door for the euro to play a greater international role” and
describing this as a “global euro moment” that represents “a prime opportunity for Europe to take greater control of its own destiny”. Lagarde has outlined specific benefits of enhanced euro status, including lower borrowing costs for EU governments and businesses, insulation from exchange rate volatility, and protection from sanctions or “other coercive measures,” giving Europe what she calls some of the “exorbitant privilege”. However, she acknowledges significant prerequisites, emphasizing that any enhanced role for the euro must coincide with greater European military strength and “geopolitical assurance,” as investors seek assets from regions that are “reliable security partners and can honour alliances with hard power”.

The dollar’s share in central bank reserves has already declined from 65% in 2016 to 57% in 2024 according to IMF data, with central banks rushing to gold and other alternatives
amid growing distrust in the dollar. However, significant structural challenges remain for the euro’s ascendancy, as analysts note that while the eurozone has a well-established central bank and large banking sector, it still lacks a globally regarded “safe asset” comparable to US Treasury bonds. ECB officials like Schnabel have begun reviving discussions about joint European debt issuance as a way to create such safe assets and bolster the euro’s international standing, suggesting that the current geopolitical uncertainty may finally provide the political momentum needed to overcome long-standing obstacles to deeper European financial integration.