Published by Global Banking & Finance Review®
Posted on February 26, 2026
4 min readLast updated: April 2, 2026
Add as preferred source on GoogleECB reduced its U.S. dollar exposure, selling a slice of holdings and reallocating proceeds to yen in a routine reserve rebalancing. Losses persist, but the bank signals a gradual path back to profit.
FRANKFURT, Feb 26 (Reuters) - The European Central Bank sold some of its dollar assets early last year and reduced the weight of the dollar in its foreign exchange reserves in what it said was a standard rebalancing of its portfolio.
The bank played down the significance of the move, which came before the market turbulence generated by U.S. President Donald Trump's tariff announcement last April.
The ECB generated a gain of 909 million euros ($1.07 billion) from this first quarter transaction and invested all proceeds into Japanese yen assets, it said in its financial accounts on Thursday.
SOLD DOLLARS FOR YEN
Unpredictable U.S. economic policy and the sharp decline in the dollar's value last year raised speculation that some large holders of U.S. assets were reducing their exposure.
"During the first quarter of 2025 the ECB sold a small portion of its U.S. dollar holdings and fully reinvested the proceeds in Japanese yen," the ECB said.
"This was part of a standard rebalancing of the composition of its foreign reserves to align with the target allocation," the ECB said.
The size of the deal was not disclosed. However, ECB data shows that dollar holdings fell to $50.9 billion last year from $51.9 billion, while yen holdings rose to 2.1 trillion from 1.5 trillion.
Calculated in euros, the weight of dollars in the ECB's foreign currency assets dropped to 78% from 83% a year earlier. However, part of this is likely due to the depreciation of the dollar.
Data showed that the share of cash in reserves also rose.
Most international reserves in the euro zone are held by national central banks and not the ECB.
GENERATES ANOTHER LOSS FOR THE FULL YEAR
For the full year, the ECB generated another financial loss but predicted a return to profit this year or next.
The ECB has been making losses for years on the lingering financial impact of its long-shuttered stimulus schemes. These were in operation for nearly a decade before and during the COVID 19 pandemic, but many of the bonds purchased then remain on the ECB's books.
As interest rates have risen sharply since then, the bank is now forced to make large interest payments on the money printed then as excess liquidity in the financial system is still around 2.4 trillion euros.
The ECB lost 1.3 billion euros in 2025, down from 7.9 billion euros a year earlier and it is carrying some 10.5 billion euros worth of losses forward with provisions reduced to zero.
This would suggest that even if the bank returns to profit this year, offsetting these losses and rebuilding provisions will take years and it could be into the next decade before it can pay dividends again.
The ECB sits on just a fraction of the bonds purchased during stimulus schemes, commonly known as quantitative easing, and most bonds are held by the national central banks across the currency bloc.
Of these, the Bundesbank has been taking the biggest financial hit while the central banks of the Netherlands and Belgium have also generated losses over the years.
Unlike commercial banks, a central bank can operate with large losses for years and even negative equity as its focus is on setting monetary policy and keeping prices stable.
($1 = 0.8477 euros)
(Reporting by Balazs Koranyi; Editing by Andrew Heavens)
The ECB rebalanced its foreign exchange reserves, selling part of its U.S. dollar holdings and reallocating the proceeds into Japanese yen while downplaying any policy signal.
It described the move as standard portfolio rebalancing to align with target allocations. Shifts in exchange rates and diversification goals also affect reserve composition.
No. The bank noted a gain from the transaction but did not reveal the total amount sold, emphasizing that it was a routine adjustment rather than a strategic shift.
Explore more articles in the Finance category
