For first time, more central banks are set to shrink dollar holdings

An OMFIF survey found more central banks intend to reduce US dollar reserves than increase them over the next decade, while gold continues to gain prominence in reserve management

More of the world's central banks plan to reduce their US dollar allocations than increase them over the next decade as political risks associated with the currency rise, an Official Monetary and Financial Institutions Forum (OMFIF) survey of public investors released on Tuesday showed.

 

It is the first time the survey has found such a shift away from the dollar.

 

The findings align with the global debate over the US dollar's role as the world's primary reserve currency, amid policy uncertainty in the United States and heightened geopolitical risks.

 

Waning dollar, glittering gold?

 

While respondents maintained their intention to increase holdings of the euro and the Chinese renminbi, they said structural challenges had reduced the appeal of both currencies. Even so, nearly all those surveyed viewed the yuan as an effective tool for portfolio diversification.

 

 

Gold, which has hit a series of record highs and is held by 82 per cent of central banks, "has moved to the centre of reserve management strategy", the survey found.

 

Quest to increase AI use

 

The use of artificial intelligence (AI) is also increasing. More than 66 per cent of central banks plan to increase AI integration in the near term, the report showed.

 

No advanced economy central bank, and only 9 per cent of central banks overall, reported being satisfied with their current level of AI adoption.