Posthaste: Canadian dollar is being dumped from FX reserves at a record pace. What's going on?
Global reserve managers appear to have lost their appetite for the Canadian dollar , according to the International Monetary Fund’s latest COFER reading.
COFER, or the Currency Composition of Official Foreign Exchange Reserves, is quarterly IMF data that tracks the global holdings of major currencies.
The big ones are the U.S. dollar and the euro which account for three-quarters of total FX reserves. However, in recent years the greenback’s share has been declining and in 2025 it touched new lows, said Warren Lovely, an economist with National Bank of Canada.
Now the Canadian dollar appears to be suffering a similar fate.
“In the final quarter of 2025, no identified currency saw its share of the global FX reserve pool trimmed more than CAD … not even USD,” said Lovely.
This has happened before. In early 2025, reserve managers also cut Canadian dollar positioning as U.S. President Donald Trump launched a trade war with Canada clearly in his crosshairs.
Over the whole of last year the Canadian dollar’s share of official reserves dropped 0.34 per cent — the largest year on year reduction since the loonie was added to the IMF’s reserve currency list, said the economist.
Translated into dollars, that means holdings fell by $34 billion in the fourth quarter alone and by $53 billion over the year.
“This is unprecedented stuff, the 11 per cent year-on-year reduction in local currency terms steeper/deeper than for any other reserve currency,” said Lovely.
COFER tracks five currencies beyond the three already mentioned including the pound sterling, Swiss franc, Australian dollar, Japanese yen and Chinese renminbi. Another category of “other currencies” serves as a catch-all.
By the end of 2025 Canada’s share of reserves was down to 2.49 per cent, ranking it fifth among the currencies the IMF reports on. “Other currencies,” meanwhile, captured a larger share of reserves, growing to 6 per cent.
Lovely said Canada’s uncertain outlook as a “small, open economy dependent on a protectionist America,” may be working against the loonie, but here’s another puzzle.
Despite the divestment recorded by the IMF, data from Statistics Canada show foreign investors remain keen on Canada.
“While not the first time the IMF and StatCan data painted conflicting pictures, the Q4 gap between CAD reserves divestment (IMF) and broader foreign buying of domestic debt (StatCan) was unprecedented. Peculiar,” he said.
Statistics Canada reports that non-residents added Canadian dollar-denominated debt right into 2026, providing a more timely picture than the IMF’s data.
“So if FX reserves managers really did get cold feet in 2025, at least alternative sources of demand for Canadian debt were located,” said Lovely.
“The implication: Non-resident positioning in Canada’s domestic debt market skewed towards ‘unofficial’ asset managers more than ever before, where the use of leverage creates scope for enhanced volatility.”
The Iran conflict may turn the tide, said the economist. As a resource-rich nation with a “fresh, pro-growth federal agenda,” Canada may once again gain favour among the “official” FX reserve managers.
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Inflation in the United States soared in March in a spike “reminiscent of the 1970s” — the first sign that the war in the Middle East is rippling through the economy.
A record increase in gas prices was responsible for nearly three-quarters of the advance, while core measures that exclude food and energy costs increased at a slower pace.
Prices for goods in trade-exposed sectors such as auto parts, apparel, personal and recreational products also continue to rise “at an uncomfortable pace,” said economists at the Royal Bank of Canada.
And that inflation could get even hotter if the oil shock persists and forces up prices for fertilizers and transportation.
“Even if a long-lasting deal to end the war is reached and the Strait of Hormuz is fully re-opened, it would take months for oil, gasoline, diesel and other commodity supplies to snap back to pre-war levels,” said Kathy Bostjancic, chief economist at Nationwide.
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Earnings: Goldman Sachs Group Inc.
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Today’s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.
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