Dollar Dominance in the Global Financial System: Dissatisfaction without Displacement

Massimiliano Castelli ()
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Massimiliano Castelli: UBS Asset Management

Financial and Economic Review, 2026, vol. 25, issue 2, 5-40

Abstract: This paper examines the evolving role of the US dollar in the international monetary system through the lens of reserve manager behaviour. Combining survey evidence from the UBS Reserve Manager Survey with IMF COFER and BIS data, it identifies a growing divergence between declining confidence in the institutional foundations of dollar dominance and the persistence of dollar-centric reserve portfolios. Structural constraints, such as market depth, liquidity, safe asset supply, and financial infrastructure, continue to anchor the system despite rising geopolitical concerns. The findings characterise the system as one of "dissatisfaction without displacement": beliefs are shifting, but portfolio adjustments remain gradual. Scenario analysis suggests that meaningful change is more likely to be crisis-driven than incremental.

Keywords: international monetary system; reserve currencies; US dollar; central banks; geopolitics; safe assets; diversification (search for similar items in EconPapers)
JEL-codes: C83 E58 F33 G11 (search for similar items in EconPapers)
Date: 2026
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