Is global confidence in the US dollar falling?

The United States dollar is still powerful, but a recent report presented at the New Economy Forum indicates that many countries are beginning to ask, “Should we depend on the dollar?” Nations in the Global South are gradually reducing their reliance on the US dollar and are looking for backup plans. The US still retains strength due to the economic and military power of America, but countries are becoming cautious about its long-term stability and do not want to put all their eggs in one basket.

Central banks used to keep most of their money in dollars, but now this trend is changing. The dollar share in central bank reserves has reduced from over 70% from around 20 years ago to below 60% today. This fall is not sharp yet, but analysts suggest that countries want some new options, and currencies such as the euro and the Chinese yuan could play a larger role in this shift in global FX reserves.

Why Confidence Is Falling

Multiple factors have contributed to declining confidence in the dollar. Countries are worried that the United States is becoming harder to predict, as there is a rise in US government debt and tariffs and sanctions on both allies and rival nations, and even the US central bank has faced political pressure. For this reason, confidence in the US dollar is falling.

China is quietly changing its strategy and has reduced its need to accumulate dollars because it lets its currency move more freely. India and China are both increasing their gold reserves. Plus, more of China’s trade is now done in yuan, not dollars; that makes China less dependent on the United States.

The Gulf countries are spending more at home than ever before. The dollar is not collapsing, but new structural changes are slowly taking shape that may make the dollar lose some of its special privileges.