Key facts
- More central banks plan to reduce dollar holdings than increase them in the coming decade.
- This is the first time the OMFIF survey has indicated a shift away from the U.S. dollar.
- Central banks are increasing allocations to the Norwegian crown and New Zealand dollar, and showing interest in sterling.
- Gold holdings are expected to increase, with a net 30% of respondents planning to boost allocations.
- Over 66% of central banks plan to increase their integration of artificial intelligence.
More central banks intend to reduce their holdings of U.S. dollars than increase them over the next decade, according to a survey by the Official Monetary and Financial Institutions Forum (OMFIF). This marks the first time the survey has indicated such a shift, driven by rising political risks associated with the U.S. currency and uncertainty in U.S. policy.
The survey of 90 central banks, public pension funds, and sovereign funds, which collectively manage approximately $10 trillion in assets, also highlighted a growing perception among respondents that the global monetary system is transitioning towards a multipolar world.
While the U.S. dollar has seen a 3% rally this year due to higher U.S. interest rates and a flight to safety, central banks are exploring diversification. They are increasing allocations to currencies such as the Norwegian crown and New Zealand dollar, and showing renewed interest in sterling. Despite structural challenges, nearly all respondents view the Chinese renminbi as an effective portfolio diversification tool.
Gold is also gaining prominence, with 82% of central banks holding it and a net 30% planning to increase their allocation in the short term. The use of artificial intelligence is also set to rise significantly, with over 66% of central banks planning to integrate it more, primarily for data analysis and back-office functions. Public funds are showing a strong appetite for physical assets like infrastructure and real estate, and a growing interest in emerging markets.