According to the International Monetary Fund, the U.S. dollar's share in global currency reserves slipped in the second quarter of 2009 while the euro's share of overall reserves rose. In percentage terms, the dollar slid from 65% to 62.8% while the euro increased from 25.9% to 27.5%.
Announced during the IMF and World Bank Annual Meeting and coming shortly after the 10th anniversary of the euro, the data confirms a trend that began in 2001. Undoubtedly, the dollar is under pressure and global central banks have begun a subtle reallocation process that decreases their overall exposure to dollar risk. So far, only the government of Iran has mandated that in the future, all of its reserves be held in non-dollar-denominated assets. Although other countries may not mandate a zero-dollar reserve policy, I do expect central banks to establish strict limits on their overall dollar ratios in the future.
The IMF data covers approximately two-thirds of the world's foreign exchange reserves. This story was also reported by Reuters and Bloomberg.
For further reading:
"The Future of Reserve Currencies", Benjamin J. Cohen, September 2009
"The Euro May Over the Next 15 Years Surpass the Dollar as Leading International Currency", Menzie Chinn and Jeffrey Frankel, February 13, 2008