Central banks around the world are backing away from the US dollar in greater numbers than at any point before, and it has reignited fears of de-dollarization. A recent report from the Official Monetary and Financial Institutions Forum (OMFIF) laid the trend bare. The study surveyed 90 central banks, sovereign wealth funds and pension funds that together manage roughly $10 trillion in assets, and it found a net move away from the greenback. These institutions now appear far keener on the euro, the yuan, the British pound, the Norwegian krone and the New Zealand dollar.
Why Central Banks Are Turning Their Backs on the Dollar
According to the report, 82% of central banks already hold gold, and 30% of them plan to add to those holdings. The shift is being put down to portfolio diversification at a time of heightened geopolitical tension. On top of that, the banks point to uncertainty around US policy, the threat of sanctions and the weaponization of the dollar as further reasons behind the decision.
There is also unease about America's swelling debt, which is closing in on the $40 trillion mark. The sheer scale of US deficits and borrowing could cast doubt on the dollar's long-term stability as a reserve asset.
Even BlackRock Is Sounding the Alarm
BlackRock, the world's largest asset manager, has echoed the same view. In a letter to shareholders, BlackRock CEO Larry Fink said the US dollar may not stay the world's dominant currency, singling out US debt as a key factor. Fink went on to suggest that digital currencies such as Bitcoin (BTC) could become the next global reserve currency.
A Movement That Has Been Building for Years
The push away from the dollar is nothing new. A growing list of countries is starting to distrust the greenback and American dominance. Sanctions and the weaponization of the dollar have left many nations wary of parking their money in it. China, Iran, Russia and South Korea, among others, have already built systems that operate outside the dollar, leaning on the yuan and cryptocurrencies. Now it seems the world's central banks are slowly making the same transition.
