Central Banks Plan to Cut Dollar Reserves for First Time, OMFIF Says

For the first time in the history of OMFIF's Global Public Investor survey, more central banks plan to reduce their US dollar allocations than raise them over the next decade. The shift is gradual, not a rupture, but it marks a real inflection point for the world's reserve currency.

What the OMFIF survey found

For the first time in the history of modern reserve management, more central banks plan to shrink their US dollar holdings than expand them, according to a survey of 90 central banks and sovereign wealth funds collectively managing roughly $10 trillion in assets, published by the Official Monetary and Financial Institutions Forum (OMFIF).

It is the first time since the GPI series began recording reserve managers' long-term intentions in 2023 that more central banks plan to decrease their dollar holdings than increase over the next 10 years. 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.

The dollar still dominates, but the trend has turned

OMFIF projects that dollar-denominated assets will still represent around 52% of global reserve portfolios a decade from now, compared with 23% for the euro and 5% for China's renminbi, underscoring that reserve diversification is expected to be evolutionary rather than disruptive.

Nearly 79% of reserve managers believe the international monetary system is moving towards a more diversified structure. The dollar continues to dominate portfolios and is still viewed as unmatched for safety and liquidity, but central banks increasingly expect to reduce dollar allocations over both the short and long term, especially in emerging markets.

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Gold is the clear winner

In 2026, 82% of central banks hold physical gold, up from 71% last year. A net 30% plan to increase their gold allocation over the next one to two years, while 61% expect the price to settle between $5,000 and $6,000 per ounce by June 2027.

The motivation behind gold purchases is increasingly strategic rather than purely financial, with protection against geopolitical risk cited by 51% of respondents, up 11% from 2024.

Where the diversification is going

Several currencies are beginning to attract attention as instruments for foreign reserve diversification. Central banks have increased their interest in the Norwegian krone, New Zealand dollar and pound sterling. Meanwhile, plans to increase holdings of the euro and yuan are continuing, although both currencies are considered to face various structural challenges.

Neither the euro nor the renminbi fully solves reserve managers' problem: the former lacks a single, deep safe asset market, while the latter remains constrained by market structure and geopolitical concerns.

Options market and stocks to watch

Watch for continued gold-linked flow as central bank buying persists. GLD and IAU are the most liquid proxies for the reserve-diversification trade, and miner names like NEM and GOLD tend to amplify moves in the metal.

On the currency side, watch UUP for signals on dollar strength versus the diversification narrative, and FXE if euro allocations pick up as OMFIF's data suggests. For more macro coverage, see other news.

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