Global Financial Institutions Cut Dollar Holdings for First Time in Three Years

A record number of global financial institutions are reducing their exposure to the US dollar, according to a new survey by the Official Monetary and Financial Institutions Forum (OMFIF). The survey, covering 74 central banks and 16 public pension and sovereign wealth funds managing over $10 trillion in reserve assets, found that 4% of institutions plan to cut their dollar allocations within the next 12 to 24 months — the first such reading in three years.

The US dollar remains the most widely used currency among financial institutions at 58% of portfolios, down from 60% in 2025, and is the only major currency expected to see a decline. Additionally, 8% of respondents anticipate reducing their dollar holdings over the next decade.

Meanwhile, 82% of surveyed central banks now hold physical gold, up from 71% last year. Geopolitical risk protection has emerged as the primary driver, cited by 51% of respondents — a jump from 40% in 2024. The data suggests central banks are diversifying reserves away from the dollar and shifting toward gold as a hedge.