Part 5/9:
The US dollar has long stood as the world's dominant reserve currency, backed by a stable US economy and trusted government debt. However, recent years have seen this perception erode. Factors such as rising US deficits, domestic political polarization, and aggressive monetary policy have all contributed to growing doubts among international reserve managers.
New York Fed data indicate that foreign central banks’ holdings of US Treasuries and other US securities have dipped to about $2.8 trillion—its lowest since early 2025, representing a significant weekly decline. Notably, the reinvestment rate of maturing bonds has slowed, with many central banks diverting their funds into safer assets or different currencies rather than rolling over US debt.