Dollar dominance: holding on in a fragmenting world

Francesca Fornasari, Head of Currency
 

“Over time, the global monetary system may shift away from reliance on a single dominant reserve currency toward a more fragmented, multipolar framework.”    

The US dollar remains the world’s dominant reserve currency – but for how much longer?

In this edition of our Global Macro Research series, we explore the evolving dynamics behind the dollar’s supremacy and the structural forces that are quietly reshaping the global monetary order. While the dollar continues to lead across key metrics – liquidity, trust, and global usage – its position is no longer unassailable.

Key Themes

The legacy of leadership

From the Roman denarius to the British pound, history shows that reserve currencies rise and fall with the fortunes of their issuing nations. The US dollar has held the crown since Bretton Woods – but the world it dominates is changing.

Politicians have overplayed their hand

US politicians have increasingly used the dollar’s reserve status as a geopolitical lever. Sanctions, while effective, have prompted many nations to seek alternatives – accelerating the development of parallel financial systems and reducing reliance on dollar-based infrastructure.

Diversification in motion

Central banks are gradually shifting away from the dollar. Gold purchases have surged, and interest in the Chinese yuan and other currencies is rising. The dollar still accounts for 57% of global FX reserves – but the trend is downward.

A multipolar future

The eurozone’s move toward joint debt issuance and China’s push to internationalise the renminbi signal a slow but steady shift. Meanwhile, digital currencies and regional payment systems are gaining traction, hinting at a future where no single currency dominates.

Why it matters

The dollar’s dominance has long been a cornerstone of global finance. But as trade patterns evolve, geopolitical alliances shift, and financial infrastructure fragments, the foundations of that dominance are being tested. For investors, policymakers, and institutions, understanding this transition is critical.

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