By A new survey by UBS Asset Management reveals a deepening sense of caution among the world’s central banks regarding their exposure to U.S. financial instruments. A full two-thirds of reserve managers are now voicing apprehension over the Federal Reserve’s autonomy, while close to half are increasingly alarmed that a weakening U.S. rule of law could significantly shape future asset allocation decisions.
This growing skepticism has been fueled in part by the controversial April 2 “Liberation Day” tariffs and what many see as increasing politicization of monetary policy. U.S. President Donald Trump’s open criticism of the Fed and pursuit of aggressive trade policies have added to global unease.
In response to these trends, 29% of surveyed central banks are actively preparing to reduce their exposure to U.S. assets. Nevertheless, nearly 80% of reserve managers still foresee the dollar maintaining its role as the leading global reserve currency in the medium term, though it currently accounts for just 58% of global foreign exchange reserves.
Gold is emerging as a key hedge in this new landscape. Over half (52%) of the surveyed reserve managers plan to increase their gold holdings, with 39% intending to repatriate gold reserves stored abroad. Much of this shift is driven by fear of potential sanctions and political pressure, particularly for emerging market nations.
The Chinese renminbi has also gained considerable attention, with 25% of respondents expecting to increase their exposure to the currency in the coming year. That compares with a net 6% planning to add euros and similar or smaller levels of interest in the Canadian dollar, British pound, and Japanese yen.
According to the survey, 35% of central banks are concerned that the United States may encourage allies to restructure long-term Treasury holdings into unconventional formats—such as ultra-long or zero-coupon instruments—which could significantly reshape global debt architecture.
Looking further ahead, the euro, renminbi, and even select cryptocurrencies are expected to benefit most from global reserve diversification trends over the next five years. Notably, the U.S. dollar, once a dominant favorite, has dropped to ninth place in terms of net preference.
Max Castelli, head of sovereign strategy at UBS Asset Management, cautions that although the dollar’s decline in central bank portfolios will be gradual, it is nonetheless underway. “The world isn’t turning away from the dollar overnight, but reserve managers are clearly looking for alternatives,” he said.