A new central banks dollar holdings survey found that, for the first time, more monetary authorities expect to reduce their U.S. dollar reserve allocations than increase them over the next decade. The findings, published by the Official Monetary and Financial Institutions Forum (OMFIF), indicate that reserve managers are reassessing portfolio strategies while expanding gold holdings and integrating artificial intelligence into investment operations.
Key Takeaways
- More central banks expect to reduce U.S. dollar reserve holdings than increase them over the next decade.
- The OMFIF survey marks the first time respondents have shown a net preference for lowering dollar allocations.
- Gold remains the preferred reserve asset for near-term allocation increases.
- More than two-thirds of surveyed central banks plan to expand artificial intelligence use.
- Survey participants collectively oversee approximately $10 trillion in assets.
The Official Monetary and Financial Institutions Forum released a survey showing a notable change in how reserve managers expect to allocate their foreign exchange assets during the coming decade.
According to the survey, more central banks now intend to reduce U.S. dollar holdings than increase them. OMFIF said this is the first time its annual survey has recorded a net preference for lowering dollar allocations among respondents.
The survey gathered responses from 90 central banks, sovereign wealth funds and public pension funds responsible for managing about $10 trillion in combined assets.
Participants identified political risks associated with the U.S. dollar as an important consideration in future reserve management decisions. The findings also coincide with continuing discussions among policymakers and financial institutions about the long-term role of the dollar within the international monetary system. Readers following broader monetary policy developments may also be interested in inflation data pushing back rate cuts and how economic indicators continue to shape policy expectations.
Despite the survey’s findings, the U.S. dollar remains the world’s primary reserve currency and continues to occupy the largest share of global reserve portfolios.
Survey Methodology and Participants
OMFIF surveyed central banks, sovereign funds and public pension funds from multiple regions.
Together, these institutions oversee approximately $10 trillion in assets, providing insight into how public investors expect to position reserve portfolios over both the short and long term.
Why Are Reserve Managers Reassessing Dollar Holdings?
Survey respondents pointed to political risks surrounding the U.S. dollar when explaining their longer-term allocation plans.
The report also found that 79% of surveyed central banks and 60% of public funds believe the international monetary system is moving toward a more multipolar structure.
Although reserve managers expect to diversify their portfolios, respondents did not identify a single currency capable of replacing the dollar’s dominant international role.
The survey found growing interest in reserve currencies outside the traditional group of major holdings. Some central banks reported plans to increase allocations to the Norwegian krone, the New Zealand dollar and the British pound.
Respondents also maintained plans to expand holdings of the euro and the Chinese renminbi. However, they noted that structural challenges continue to limit the appeal of both currencies as larger reserve assets. Even so, nearly all respondents viewed the Chinese yuan as an effective tool for portfolio diversification.
Factors Influencing Reserve Allocation Decisions
Reserve managers continue to evaluate multiple considerations when determining reserve allocations, including liquidity, diversification, geopolitical risks and long-term financial stability.
The survey indicates that diversification rather than wholesale replacement remains a key feature of reserve management planning.
How Are Central Banks Managing Foreign Exchange Reserves?
Gold remains one of the strongest areas of interest among reserve managers. The survey found that 82% of central banks currently hold gold within their reserve portfolios.
Looking ahead one to two years, gold ranked as the asset that respondents were most likely to increase. A net 30% of surveyed institutions said they intend to expand their gold allocations during that period.
The report described gold as moving to the center of reserve management strategy for many central banks.
Artificial intelligence is also becoming a larger part of reserve management operations. More than two-thirds of central banks surveyed expect to increase AI integration in the near term.
The report found that no advanced economy central bank expressed satisfaction with its current level of AI use, while only 9% of all surveyed central banks reported being content with existing implementation. Current applications primarily involve data analysis and back-office operations.
The survey also identified a significant difference between developed and emerging economies. More than 89% of central banks in developed economies currently use AI, compared with 44% of central banks in emerging markets.
Historical Role of the U.S. Dollar in Global Reserves
The U.S. dollar continues to serve as the world’s principal reserve currency.
The survey notes that while reserve managers are considering broader diversification strategies, respondents did not identify another currency with sufficient scale and liquidity to replace the dollar’s central position in global reserve management.
What Could Changing Reserve Allocations Mean for Global Markets?
Reserve allocation decisions by central banks can influence demand for sovereign bonds, reserve currencies and traditional safe-haven assets over extended periods.
The survey suggests that reserve managers are broadening portfolio diversification while maintaining exposure across multiple asset classes.
Gold attracted the strongest short-term interest among reserve assets, while smaller reserve currencies also received increased attention from respondents.
Among public investment funds, infrastructure and real estate ranked ahead of other asset classes for planned allocation increases over the next one to two years.
Nearly 60% of public funds surveyed said they expect to increase exposure to physical assets. The survey also found stronger interest in emerging markets. Thirty-eight percent of public funds plan to increase allocations to emerging economies, compared with 27% in the previous survey. By comparison, interest in increasing allocations to developed markets declined to 25%, down from 47% a year earlier.
Despite broader diversification plans, respondents continued to identify the United States and China as the most attractive investment markets, citing their positions within the global artificial intelligence sector. Investors evaluating long-term portfolio resilience may also find value in high-net-worth risk management as diversification strategies continue to evolve across asset classes.
Frequently Asked Questions
What did the latest central banks dollar holdings survey reveal about U.S. dollar holdings?
The OMFIF survey found that, for the first time, more central banks plan to reduce U.S. dollar reserve holdings over the next decade than increase them.
Why do central banks hold foreign exchange reserves?
Central banks maintain foreign exchange reserves to support financial stability, manage currency operations, meet international obligations and maintain confidence in their financial systems.
Why are some reserve managers reducing U.S. dollar allocations?
Survey respondents cited political risks associated with the U.S. dollar and broader diversification objectives as factors influencing future reserve allocation decisions.
How could changes in reserve holdings affect global financial markets?
Changes in reserve allocations can influence long-term demand for reserve currencies, sovereign debt and traditional reserve assets such as gold, although diversification does not necessarily imply replacement of the U.S. dollar.
