Media365
The global reserve landscape is showing signs of a structural shift, with central banks for the first time indicating they are more likely to reduce their exposure to the US dollar than increase it over the next decade, according to the latest survey by the Official Monetary and Financial Institutions Forum (OMFIF).
The findings mark a significant turning point in global reserve management, reflecting growing concerns over geopolitical uncertainty, US policy risks and the gradual emergence of a more multipolar monetary system.
The annual survey, which covered 90 central banks, sovereign wealth funds and public pension funds managing nearly $10 trillion in assets, found that political risks surrounding the world’s dominant reserve currency are prompting institutions to rethink long-term allocation strategies.
The shift comes amid an intensifying global debate over de-dollarisation, although the U.S. dollar continues to dominate international reserves and has gained around 3 per cent this year, supported by higher U.S. interest rates, strong demand for American assets, and safe-haven flows during geopolitical tensions, including the recent US-Iran conflict.
Multipolar world gaining acceptance
Nearly 79 per cent of central banks and 60 per cent of public investment funds surveyed believe the global monetary system is steadily transitioning toward a multipolar reserve currency framework.
While the dollar remains without a credible single challenger, reserve managers are increasingly diversifying into smaller developed-market currencies. Interest has risen in the Norwegian krone, New Zealand dollar and British pound, alongside continued plans to raise allocations to the euro and China’s renminbi.
However, respondents noted that structural challenges continue to limit the euro and yuan from becoming full-fledged alternatives to the dollar, even as almost all participants viewed the Chinese currency as an effective portfolio diversification tool.
Gold becomes a strategic reserve asset
The survey also underscored gold’s growing importance in central bank portfolios.
Held by 82 per cent of central banks, the precious metal has moved from being a defensive hedge to becoming a core strategic reserve asset amid persistent geopolitical uncertainty and elevated market volatility.
Over the next one to two years, gold is the asset that central banks are most likely to increase holdings of, with a net 30 per cent of respondents planning to boost allocations.
Gold prices have repeatedly touched record highs in recent months as investors sought protection against inflation, geopolitical tensions and financial market uncertainty.
AI adoption accelerates across central banks
Beyond reserve allocation, the survey highlighted rapid adoption of artificial intelligence across public financial institutions.
More than two-thirds of central banks plan to expand AI integration in the near future, with no advanced economy central bank reporting satisfaction with current AI usage.
Institutions are primarily deploying AI for data analysis, forecasting and back-office operations, although adoption remains uneven. Nearly 89 per cent of central banks in advanced economies are already using AI, compared with 44 per cent in emerging markets.
OMFIF said policymakers increasingly view market volatility as a permanent feature rather than a temporary disruption, encouraging investment in technologies that improve decision-making and operational efficiency.
Emerging markets attract fresh capital
The report also pointed to a notable shift in investment preferences among sovereign investors.
Around 38 per cent of public funds intend to increase allocations to emerging markets, up sharply from 27 per cent a year earlier. By comparison, interest in raising exposure to developed economies has fallen to 25 per cent, down from 47 per cent last year.
Infrastructure and real estate emerged as the preferred asset classes among public funds, with nearly 60 per cent planning to raise investments over the next two years.
Despite the broader diversification trend, the United States and China remain the world’s most attractive investment destinations, largely because of their leadership in the rapidly expanding artificial intelligence sector.
The survey suggests that while the US dollar is unlikely to lose its reserve currency dominance anytime soon, central banks are increasingly preparing for a world in which reserve portfolios become more diversified, technology-driven and less dependent on a single global currency.
