Global reserve managers are increasingly leaning towards the high-yielding U.S. dollar, spurred by geopolitical tensions and low returns associated with China’s yuan, according to a survey by the Official Monetary and Financial Institutions Forum (OMFIF). The survey, published on Tuesday, highlights a shift away from the trend of de-dollarisation, with a net 18% of reserve managers planning to boost their exposure to the U.S. dollar in the next 12-24 months, more than any other currency. Key reasons for this shift include the dollar’s crucial role in global trade and expectations of higher relative returns.
Interest in China’s yuan among reserve managers has notably diminished, marking a significant change from previous years. This year, 12% of the 73 central bank reserve managers surveyed by OMFIF plan to reduce their yuan holdings, while only 13% plan to increase them. This contrasts sharply with 2021 and 2022, when over 30% of respondents intended to increase their yuan exposure. Factors such as market transparency, geopolitical concerns, and lower policy rates in China compared to higher yields available in U.S. or European government bonds were cited as deterrents. Despite the current trend, some reserve managers anticipate long-term increases in yuan exposure. Additionally, the survey found that central banks intend to continue increasing their gold holdings, potentially adding $600 billion in gold reserves in the coming years.