US dollar retains dominance in 2022 while China's yuan gains share among global currency reserves

• The US dollar is still the world's dominant currency, new IMF data showed Thursday.
• The greenback's share of global currency reserves held steady at 59% in the first quarter.

The US dollar retained its dominance as the world's most widely held reserve currency, new data from the International Monetary Fund published Thursday shows.

The dollar's share of total allocated reserves was 59% in the first quarter of 2022, unchanged from the fourth quarter and down slightly from 59.4% a year ago.

The Chinese yuan's share of global reserves was 2.9%, up from 2.8% in the fourth quarter and 2.5% a year ago. The British pound rose to 5% from 4.8% in the prior quarter and 4.7% a year earlier.

Meanwhile, the euro, which is the world's second most widely held reserve currency, saw its share of the global total dip to 20% from 20.6% in the fourth quarter and 20.5% a year ago. And the Japanese yen's share slipped to 5.4% from 5.5% in the prior quarter and 5.9% a year earlier.

The dollar has held the line as the West froze Russian foreign exchange holdings after Vladimir Putin launched his invasion of Ukraine. The move raised concerns that other countries would eventually shed their exposure to the US dollar to avoid being vulnerable to similar sanctions in the future.

But the Federal Reserve's interest rate hikes in response to persistent inflation have sent bond yields soaring, making the dollar more attractive to investors. In fact, the dollar hit a 20-year high against an index of global currencies earlier this year.

Meanwhile, China has been pushing the yuan to erode the dollar's dominance in world finance.

Most recently, the People's Bank of China announced earlier this week it is developing a yuan reserve with the Bank for International Settlements and five other nations. Each of the members will contribute about 15 billion yuan, or $2.2 billion.

And more countries are using the yuan in international trade. India's top cement producer is using China's currency to pay for a cargo of Russian coal, according to a Reuters report Thursday.