Global central banks layout "de-dollarization"? The independence of the Federal Reserve is questioned, gold and euro become safe havens

According to the Zhitong Finance APP, a survey released by UBS Asset Management on Thursday shows that two-thirds of central bank managers are concerned about the threat to the independence of the Federal Reserve, with nearly half of the officials believing that the rule of law in the United States may deteriorate enough to seriously affect their asset allocation. Among nearly 40 central banks, 35% believe that the U.S. may ask allies to convert long-term debt into other instruments, such as ultra-long-term zero-coupon bonds. The survey results highlight growing concerns about the safe-haven status of the world's largest reserve currency and the largest bond market, given U.S. President Trump's confrontations with long-term allies over trade and security issues, as well as his attacks on the Federal Reserve. The tariff measures announced by Trump on April 2 have impacted the dollar and U.S. Treasury bonds. He has also pressured the Federal Reserve to cut interest rates, and his advisors have proposed some unorthodox ideas to control the ever-expanding U.S. debt. Max Castellani, Head of Global Sovereign Market Strategy and Advisory at UBS Asset Management, stated that these concerns indicate that "it is very clear" that the tariff measures have changed reserve managers' perceptions of the dollar. The survey indicates that 29% of respondents wish to reduce their exposure to U.S. assets in response to recent developments. However, over the next year, 25% of central banks expect to reduce their dollar exposure, slightly lower than in the past year, after excluding those that wish to increase their dollar exposure. Castellani said, "When you ask: Do you think the dominance of the dollar will really change significantly? The answer is no." He added that reserve managers need time to adjust. Nearly 80% of respondents expect the dollar (currently accounting for 58% of foreign exchange reserves) to remain the global reserve currency. Over the next year, gold is the biggest winner, with 52% of central banks wishing to increase their gold reserves. The survey shows that 39% of respondents plan to increase the proportion of domestic gold reserves. Castellani stated that this mainly reflects concerns among emerging market central banks about the risks of sanctions, particularly regarding gold stored in the U.S. Trump's policies have also reignited Germany's questions about its central bank's gold reserves, some of which are stored at the New York Federal Reserve Bank. UBS's survey shows that over the next five years, reserve managers believe the euro will benefit the most from the global transition, followed by the renminbi and crypto assets. The dollar has dropped from first place last year to ninth. However, over the next year, only a net 6% of respondents plan to increase their euro holdings, while the renminbi ranks first with a 25% increase. The Canadian dollar, British pound, and Japanese yen are other currencies with relatively high net increases. Castellani said, "People are very optimistic about Europe. But expectations are very high, and if Europe does not reform, I think the revival of Europe will be quite short-lived."