Asia's Dollar Share Drops to 57.1% Amid Gold Buying
Asia's dollar reserve share falls to 57.1% while gold holdings rise sharply. Japan's Treasury holdings drop to $1.1 trillion.
Key points
- Dollar share of Asian reserves fell to 57.1% in Q1 2026, down six points since 2018.
- Japan holds $1.1 trillion in US Treasuries, while China’s holdings dropped to $618 billion.
- Singapore increased its gold holdings by over 60% in eight years, leading Asian diversification.
The dollar’s share of Asia’s official foreign exchange reserves fell to 57.1% in the first quarter of 2026. This represents a decline of nearly six percentage points over the past eight years, according to Haver Analytics data. No single currency has absorbed all of this lost share, indicating a broader diversification strategy rather than a direct substitution.
Japan remains the largest foreign holder of US Treasuries with $1.1 trillion in assets. Its share of foreign holdings of US long-term securities has halved since 2012. China’s holdings have slipped to $618 billion, the lowest level since September 2008, as the euro area and UK absorbed the ground lost by Asian creditors.
Asia diversifies away from dollar assets
The residual group of other currencies gained the most share in Asia’s reserves. This category rose by approximately 3.7 percentage points over the last eight years. The renminbi’s share remains modest at 2.0%, while the yen and Canadian dollar each gained about half a point. This pattern supports the view that Asian central banks are spreading risk across multiple instruments.
Gold purchases reflect this diversification trend across the region. Singapore has added more than 60% to its gold holdings over the past eight years. India and Thailand have increased their stocks by more than half, while China added close to 30%. These volume increases suggest a concerted effort to hold hard assets alongside traditional currency reserves.
Japan raises policy rate to 1.25%
The Bank of Japan raised its policy rate to 1.25% last week. Governor Ueda struck a hawkish note during the announcement, signaling continued monetary normalization. The spread between Japanese and US policy rates has narrowed to about two percentage points. This reduction in rate differentials has supported a rebound in the yen from record lows.
The 10-year Japanese government bond yield has touched 3% recently. This level reflects the broader shift in monetary policy and market expectations. Coordinated intervention has helped stabilize the currency against the dollar. The rise in yields indicates that the era of ultra-low Japanese rates is ending.
Trade settlement remains dominated by dollars
Trade settlement patterns have changed the least of all indicators. South Korea still settles about 84% of its exports and 79% of its imports in dollars. Broader studies point to similar trends across the region. This suggests that despite changes in reserve composition, the dollar remains the primary medium for cross-border trade in Asia.
