RBA becomes first major central bank to cut US dollar reserves

The Reserve Bank of Australia has become the first major central bank to confirm it has reduced its US dollar holdings, joining a broader shift by global monetary authorities seeking to hedge against political risk under a volatile White House.afr

Data published by the Australian Financial Review on Tuesday shows the RBA has trimmed its dollar allocation as part of a diversification strategy, a move that comes alongside new evidence that central banks worldwide are rethinking their long-standing reliance on the greenback.afr

Central Banks Signal a Dollar Pullback

A June survey by the Official Monetary and Financial Institutions Forum, a UK-based think tank, found that for the first time in three years, more central banks plan to reduce their dollar allocations than increase them over the coming decade. The shift is driven by rising political risks associated with the US currency, with public pensions and sovereign wealth funds also looking to alternatives.bloomberg+1

"Advanced economies favor the euro and emerging markets focus on the renminbi" as alternatives to the greenback, the OMFIF report noted. Reuters reported that two-thirds of surveyed central banks cited political risk as a key factor in their allocation decisions.reuters+1

The trend aligns with a broader erosion of dollar dominance. The greenback experienced its steepest decline since the 1973 oil crisis in the first half of President Trump's second term, falling more than 10% against other major currencies. Trump's tariff threats, attempts to influence the Federal Reserve, and dismissals of officials have shaken international trust in dollar-denominated assets.globalissues

Dollar Still Dominant — For Now

Despite these shifts, official data tells a more nuanced story. The International Monetary Fund reported that the US dollar's share of global foreign exchange reserves actually ticked up to 57.13% in the first quarter of 2026, from 56.42% at the end of 2025. Net foreign investment into the United States totaled $133.5 billion in June, and net foreign purchases of long-term US securities reached $207.1 billion.dailybeirut+1

Yet longer-term trends point in one direction. The dollar's reserve share has fallen from roughly 70% in 2000 to below 58% today. Central banks bought a net 289 tonnes of gold in the second quarter of 2026 — a 62% increase year-on-year — as they sought alternatives to dollar reserves. China's holdings of US Treasury securities fell to $633.4 billion in June, the lowest since 2008.globalissues+1

No Easy Replacement

Leading monetary economist Barry Eichengreen has warned of a likely acceleration in the dollar's decline but maintains that "no other currency is positioned to fill the dollar's shoes," describing the greenback as "the cleanest dirty shirt in the pile". The RBA's move, while modest in scale, carries outsized symbolic weight — a signal from an established US ally that even close partners are quietly repositioning.globalissues