(ECNS) -- The global push toward de-dollarization is accelerating, with the U.S. dollar's share of central bank foreign exchange reserves slipping to around 40 percent — its lowest level in at least two decades — according to data cited by the Kobeissi Letter.
A survey released in June 2025 by the Official Monetary and Financial Institutions Forum (OMFIF) indicates that while the U.S. dollar remained the world's most popular reserve currency in 2024, it dropped to seventh place in 2025, signaling a rapid shift in global preferences.
The U.S. dollar's dominant role in global transactions has long rested on three pillars: a stable current account position, strong institutional credibility, and an independent monetary policy. Today, all three foundations are showing signs of strain.
To sustain its hegemony, the U.S. has continued to export large quantities of dollars to the rest of the world, contributing to persistent fiscal deficits and long-term trade deficit. Rising U.S. debt is eroding global confidence in the dollar's long-term credibility.
Beyond structural imbalances, recent U.S. policy signals have added to market unease. Trade actions, including renewed tariff pressure, and the expanded use of financial and legal tools in foreign policy have reinforced concerns about the dollar's exposure to geopolitical risk. For reserve managers, the issue is less any single action than the growing perception that dollar assets are increasingly entangled with U.S. political strategy rather than neutral market fundamentals.
The independence of the U.S. Federal Reserve has also come under scrutiny. Recently, the U.S. Department of Justice issued a subpoena to the Fed, while President Donald Trump stated he was unconcerned about whether Fed Chair Jerome Powell remains in his position.
For many central banks, reserve allocation is no longer guided solely by yield or liquidity. Political predictability, institutional independence, and sanctions risk have become decisive variables. As U.S. domestic polarization intensifies and questions surface over the autonomy of monetary policy, reserve managers are increasingly treating diversification not as a strategic choice, but as a form of risk insurance.
Market participants warn that the dollar's value depends heavily on a transparent, independent, and predictable policy framework. Any political interference with the Fed could trigger a sharp decline in global confidence in the currency.
According to the 2025 OMFIF survey, 70% of respondents said the U.S. political environment makes them reluctant to invest in dollar assets. As a result, many countries are seeking alternatives.
Gold has emerged as the most immediate beneficiary of this reassessment. Morgan Stanley estimates gold's share of global reserve assets has risen to roughly 25–28 percent, up from about 14 percent previously. Some analysts, including commentary cited by India's Economic Times, project that gold could overtake the dollar as the world's largest reserve asset as early as 2026. Spot gold prices surged past $5,000 on Monday, reflecting sustained demand for politically neutral safe-haven assets.
At the same time, emerging technologies are being increasingly applied to cross-border payments, accelerating the diversification of global trade settlement. Regional frameworks such as "BRICS+" and "ASEAN+" are expanding their influence. China has signed local-currency swap agreements with dozens of countries and is discussing the establishment of digital currency projects with several major economies.
The international role of the renminbi has continued to rise steadily. It is now the world's second-largest currency for trade finance and the third-largest for global payments, according to the People's Bank of China.
What is changing is not merely the dollar's share of reserves, but its role in the global system. As trust fragments and alternatives mature, the era of automatic dollar dominance is giving way to a more contested monetary order — one in which credibility, not tradition, determines reserve power.
（By Gong Weiwei）
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