More global reserve managers plan to increase exposure to the now high-yielding U.S. dollar as their interest in China’s yuan has soured due to low returns and geopolitical tensions, the Official Monetary and Financial Institutions Forum said.
The data, from a survey carried out by the think tank and published on Tuesday, challenges – at least in the short term – the trend towards de-dollarisation, the idea that countries will diversify away from dollars.
A net 18% of reserve managers surveyed said they intended to boost exposure to the U.S. dollar in the next 12-24 months, more than any other currency. They cited the dollar’s role in global trade and expectations of higher relative returns as reasons.
But demand for China’s currency among reserve managers has stalled.
“This is the first year we’ve seen any meaningful share of reserve managers looking to downscale their renminbi holdings,” said Nikhil Sanghani, OMFIF Economic and Monetary Policy Institute managing director, referring to China’s currency by its other name.