Central Banks Concerned About US Dollar’s Reliability
A new survey conducted by institutional asset manager Invesco reveals that central banks around the world are becoming increasingly uncertain about the reliability of the US dollar. The survey, which involved 57 central banks, found that their concerns stem from America’s behavior on the geopolitical stage and its escalating debt levels.
Key Points:
- Central banks are worried about the US treatment of Russians, particularly in relation to the conflict with Ukraine.
- Many central banks believe that the US debt levels are negatively impacting the dollar’s long-term viability.
- While the Chinese yuan is not expected to become the world’s reserve currency, central banks are planning to increase their holdings of the renminbi due to its strong performance and uncorrelated returns.
- Central banks view gold as an attractive asset now that the dollar has lost some of its charm.
- Physical gold holdings have increased significantly compared to 2020, while the usage of gold ETFs has declined.
Central Banks’ Hot Take: Increasing Chinese Yuan Holdings and Turning to Gold
The survey conducted by Invesco shows that central banks are losing confidence in the US dollar and are exploring alternative options. While they don’t see the Chinese yuan becoming the world reserve currency, they plan to increase their renminbi holdings. Additionally, the banks are turning to gold as a safe-haven asset. The US freezing of Russian reserves has made gold more attractive, prompting central banks to prefer physical gold over gold ETFs or derivatives. This shift reflects a growing concern about the reliability of the US dollar and its impact on global financial stability.