The European Central Bank said it sold a part of its U.S. dollar holdings early last year and reduced the dollar's share in its foreign exchange reserves, describing the operation as a routine rebalancing to better align reserves with target allocations. The transaction, which the bank said occurred in the first quarter of 2025, generated a gain of 909 million euros and the full proceeds were reinvested into Japanese yen assets, according to the ECB's financial accounts.
The ECB sought to downplay any broader significance of the operation, noting the sale preceded the market turbulence tied to U.S. President Donald Trump’s tariff announcement last April. The central bank framed the move as part of normal portfolio maintenance rather than a response to a single market event.
In a statement included in its published accounts the ECB said: "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. This was part of a standard rebalancing of the composition of its foreign reserves to align with the target allocation." The ECB did not disclose the precise size of the individual deal.
Aggregate data in the ECB's accounts shows a modest fall in dollar holdings, from $51.9 billion to $50.9 billion, while yen holdings rose from 1.5 trillion to 2.1 trillion. Measured in euros, the weight of dollars in the ECB's foreign currency assets fell to 78% from 83% a year earlier. The bank noted that some of this shift in percentage terms is likely attributable to the depreciation of the dollar.
The ECB's data also showed an increase in the share of cash within its reserves. It highlighted that most international reserves in the euro area are held by national central banks rather than the ECB itself, underscoring the distributed nature of reserve holdings across the currency bloc.
On a full-year basis the ECB again reported a financial loss, though the bank said it expects a return to profitability either this year or the next. The institution has been running losses for several years as a result of the lingering financial impact of stimulus programmes that were wound down after nearly a decade of use before and during the COVID-19 pandemic.
Many of the bonds purchased under those programmes remain on central bank balance sheets. With interest rates having risen sharply since those purchases, the ECB is now paying larger interest costs on the money that was created back then, while excess liquidity in the financial system remains around 2.4 trillion euros. Those dynamics have continued to weigh on the bank's finances.
For 2025 the ECB recorded a loss of 1.3 billion euros, an improvement from a 7.9 billion euro loss a year earlier. The bank is carrying forward approximately 10.5 billion euros in losses, with provisions reduced to zero. The accounts indicate that even if profitability resumes this year, offsetting accumulated losses and rebuilding provisions will take multiple years and could extend into the next decade before the ECB is in a position to resume paying dividends.
The ECB retains only a fraction of the bonds originally purchased during the quantitative easing programmes; the majority remain on the balance sheets of national central banks across the euro area. Among those national banks, the Bundesbank has sustained the largest financial hit, while the central banks of the Netherlands and Belgium have also recorded losses over the years.
Officials noted that unlike commercial banks, a central bank can operate with substantial losses and even negative equity for an extended period because its primary mandate is monetary policy and price stability rather than profit maximization. The financial accounts reiterate the exchange rate used for reporting: $1 = 0.8477 euros.
The ECB's disclosure of the dollar sale and yen reinvestment provides a snapshot of one element of reserve management and highlights how portfolio rebalances, legacy stimulus effects and prevailing currency movements interact on central bank balance sheets. The institution's financial position remains shaped by past asset purchases, current interest rate conditions and continued elevated excess liquidity in the financial system.