Global reserve managers are quietly diversifying away from the U.S. dollar—but not toward the traditional major currencies that once shared the stage. According to Standard Chartered, recent IMF data show that central banks and sovereign funds have been shifting allocations into a broader mix of smaller G-10 and emerging-market currencies rather than the euro, sterling or yen.
Historically, reserve diversification away from the dollar would have meant greater holdings of other major currencies. But StanChart notes that this pattern has broken down: recent flows show a steady accumulation of “other currencies,” a catch-all IMF category that includes the Canadian and Australian dollars, the Swiss franc, and some liquid emerging-market units.
This trend points to a structural change in the way official investors manage currency risk. While many acknowledge the dollar’s long-term dominance may be fading slightly, there is still no clear successor.
In practical terms, the global reserve landscape is fragmenting: rather than a clean rotation from the dollar to another major currency bloc, diversification now reflects a search for incremental yield, stability and geopolitical neutrality. That helps explain why smaller currencies, once niche in official portfolios, are becoming more common—even if no single one looks poised to rival the greenback.
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The gradual diversification of global reserves implies less structural demand for U.S. assets at the margin, though the absence of a clear alternative limits near-term pressure on the dollar. Flows into smaller G-10 and EM currencies may add background support for the AUD, CAD and select EM FX.
This article was written by Eamonn Sheridan at investinglive.com.