Central Banks Shift Dollar Reserves, Increase Bets On Euro And Gold

Although the U.S. dollar remains the dominant global reserve currency, its foothold may be weakening as central banks increase their holdings of the euro, renminbi, and gold.

The euro is said to be the primary beneficiary of this shift.

Rising economic and geopolitical risks are prompting a reassessment of dollar holdings, according to a UBS survey of 40 central banks and reserve managers, The Straits Times reported.

The survey found that many respondents harbor distrust of U.S. President Donald Trump’s right-leaning "Make America Great Again" (MAGA) policies, particularly his tariff-driven and cost-cutting economic agenda.

Nearly one-third of central banks had reduced—or planned to reduce—their exposure to U.S. assets.

“There are clear signs of diversification away from the U.S. dollar over the past year,” said Dr. Massimiliano Castelli, head of global sovereign markets strategy and advice at UBS Asset Management.

“The euro is the biggest beneficiary of this shift.”

Among central banks that altered their currency allocations, over half reduced their U.S. dollar holdings, while only 23% made additions. By contrast, nearly 70% increased their euro reserves.

UBS expects allocations to the euro and renminbi to continue rising in line with macroeconomic and geopolitical trends. These currencies, Dr. Castelli noted, are “most likely to benefit from macroeconomic and geopolitical shifts over the next five years.”