(Yicai Global) Jan. 4 -- The US dollar’s share of global foreign exchange reserves fell further in the third quarter of last year to reach the lowest level since 1995, according to a survey by the International Monetary Fund.

US dollar-denominated forex reserves held by central banks stood at USD708.1 billion in the three months ended Sept. 30, making up 59.15 percent of the total, the IMF’s Currency Composition of Official Foreign Exchange Reserves showed. That compared with 59.23 percent in the second quarter.

The IMF noted that in recent years, central banks have been slowly advancing the adjustment of their forex holdings. As monetary authorities in emerging markets and developing economies seek to further diversify their reserve currency composition, the US dollar’s share will continue to shrink.

Chinese yuan reserves totaled USD31.9 billion in the third quarter, ranking fifth after the dollar, the Euro, the Japanese yen, and the British pound, and its share of global forex reserves was 2.66 percent, per the IMF data. The redback’s share has risen 1.54 percentage point over the past four years.

Exchange rate fluctuations are likely to impact the make up of reserve currency portfolios at central banks. The dollar’s share usually contracts when it weakens against other major currencies because the dollar value of reserves denominated in other currencies climbs, the IMF said.

In turn, the US dollar exchange rate may be affected by a number of factors, including diverging economic paths between the United States and other economies, differences in monetary and fiscal policies, as well as foreign exchange sales and purchases by central banks.

US dollar exchange rates against major currencies have remained broadly unchanged over the past two decades. The drop in the dollar’s share of global reserves shows that central banks are cutting their holdings of dollar assets, the IMF said.

The US dollar remains the dominant international reserve currency notwithstanding major structural shifts in the international monetary system over the past six decades, the IMF noted, adding that any changes to the dollar’s status are likely to emerge in the long run.

Editor: Peter Thomas