The Reserve Bank of Australia has become the first major central bank to confirm that it has reduced its US dollar holdings as part of a wider trend by policymakers to diversify their assets away from the United States under an unpredictable White House.
Data from the International Monetary Fund and think tank surveys showed for the first time this year that central banks are planning to trim their exposure to the greenback, rather than build up reserves over the next decade to hedge against political risk and swings in currencies and bonds.
The RBA indicated in its 2025 annual report that less than half of its currency reserves were in US dollars, which is the lowest level since 2012, according to a Deutsche Bank report to clients.
“The central bank has discreetly reduced the target share of US dollars to 45 per cent from 55 per cent, and shifted that allocation to euros,” said Lachlan Dynan, a macro strategist at Deutsche Bank.
“This is the first G10 central bank to have effectively confirmed some reduction in its target US dollar allocation in recent years, even if the allocation remains within the range of historical allocations.”
The euro now accounts for 30 per cent of Australia’s foreign currency reserve, while the yen, Canadian dollar, yuan, pound and South Korean won make up 5 per cent each.
The RBA’s assistant governor for financial markets, Christopher Kent, said at a fireside chat in August that the central bank was a “little long” the US dollar when he was questioned about the reduction in holdings, but noted the change was not a forecast about the currency.
“It wasn’t really based on some deep insight because I don’t have any deep insights on exchange rates, other than don’t predict where they’re going,” he told Reuters. “We hold currencies that we deem to be highly liquid … We hold these for policy purposes in case we ever decide there’s a need to intervene.”
Source: https://www.afr.com/markets/currencies/rba-cuts-us-dollar-reserves-as-central-banks-hedge-against-trump-20260831-p60t4c