De-dollarization

Foreign central banks are shifting strategically away from the U.S. dollar as the dominant reserve currency, with the global dedollarization trend gaining traction. Driven by geopolitical concerns—such as the fear that other countries could also see the same freezing by the US of their currency reserves like Russia—and policy shifts like the Trump administration’s trade measures, reserve managers are increasingly reallocating their holdings into other currencies like the EUR and into gold. This comes at a time where Europe expands fiscal spending and issues more euro-denominated bonds attracting greater capital inflows from central banks seeking diversification. This all could continue to weigh on the USD.