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Press Release

World’s Central Banks Are Turning Away from U.S. Dollar, Says MUFG Head of Research

Press contact:
Assaf Kedem
Direct: 212-782-4926

Shift to non-dollar reserves may indicate fear of uncertainty in U.S. politics and economic policy

New York, September 30, 2019 – Appetite for the U.S. dollar has been shrinking to unprecedented levels among the world’s central banks, reflecting their fear of uncertainty in U.S. economic policy and the American political landscape, says Derek Halpenny, Head of Research with Global Markets, EMEA, and International Securities at Mitsubishi UFJ Financial Group, Inc. (MUFG).

Mr. Halpenny delivered his comments to financial journalists at a recent session of MUFG Explores, a media series on topical issues featuring the bank’s subject-matter experts, at MUFG’s New York offices earlier this month.

Diversifying away from the greenback
The U.S. dollar’s share of currency reserves held by central banks around the world—as reported to the International Monetary Fund—has been declining since 2017 toward record lows. Central banks hold reserves in different currencies primarily to support their liabilities, and occasionally to support the values of their countries’ respective currencies.
“The U.S. dollar is still the world’s foremost reserve currency, but central banks appear to be reducing their exposure to it in a sustained manner,” Mr. Halpenny says. “The recent decline in the value of their dollar reserves is all the more striking given that the dollar has actually strengthened for most of 2019. This means central banks are diversifying away from the greenback fast enough to offset its rising value.”

Mr. Halpenny cites U.S. political and economic-policy uncertainty as likely reasons for central banks to trim their dollar exposure. “The U.S. administration’s shifting positions on trade—especially with China—have created confusion as economic officials of other countries attempt to formulate a response,” he says. “Additionally, as we approach the 2020 U.S. Presidential election with no clear victor in sight—and with the country’s two major political parties far apart from each other on geopolitical and economic-policy issues—the road ahead looks very ambiguous.”

Mr. Halpenny points to capital-flow data from the U.S. Treasury Department indicating that banks have been net sellers of U.S. Treasury bonds for four years now. In the 6-month period leading to the end of July, 2019, central banks from around the world sold $124 billion worth of bonds. They sold $180 billion in all of 2018, $149 billion in 2017, and $332 billion in 2016.
“The dollar’s position as the world’s most dominant reserve currency allows the United States to enjoy lower interest rates, increased investment, cheaper consumption, and the ability to borrow and spend well beyond what other nations can afford,” Mr. Halpenny says. “However, a continuation of the current trend among central banks could erode this enviable position.”

About Mitsubishi UFJ Financial Group, Inc.’s U.S. Operations including MUFG Americas Holdings Corporation
The U.S. operations of Mitsubishi UFJ Financial Group, Inc. (MUFG), one of the world’s leading financial groups, has total assets of $334.3 billion at June 30, 2019. As part of that total, MUFG Americas Holdings Corporation (MUAH), a financial holding company, bank holding company and intermediate holding company, has total assets of $172.0 billion at June 30, 2019. MUAH’s main subsidiaries are MUFG Union Bank, N.A. and MUFG Securities Americas Inc. MUFG Union Bank, N.A. provides a wide range of financial services to consumers, small businesses, middle-market companies, and major corporations. As of June 30, 2019, MUFG Union Bank, N.A. operated 350 branches, consisting primarily of retail banking branches in the West Coast states, along with commercial branches in Texas, Illinois, New York and Georgia, as well as 22 PurePoint® Financial Centers.

MUFG Securities Americas Inc. is a registered securities broker-dealer which engages in capital markets origination transactions, private placements, collateralized financings, securities borrowing and lending transactions, and domestic and foreign debt and equities securities transactions. MUAH is owned by MUFG Bank, Ltd. and Mitsubishi UFJ Financial Group, Inc. MUFG Bank, Ltd., a wholly owned subsidiary of Mitsubishi UFJ Financial Group, Inc., has offices in Argentina, Brazil, Chile, Colombia, Peru, Mexico, and Canada. Visit or for more information.

About MUFG (Mitsubishi UFJ Financial Group, Inc.)
Mitsubishi UFJ Financial Group, Inc. (MUFG) is one of the world’s leading financial groups. Headquartered in Tokyo, and with over 360 years of history, MUFG has a global network of approximately 3,000 locations in more than 50 markets. The Group has over 180,000 employees and offers services including commercial banking, trust banking, securities, credit cards, consumer finance, asset management, and leasing. The Group aims to “be the world’s most trusted financial group” through close collaboration among our operating companies and flexibly respond to all of the financial needs of our customers, serving society, and fostering shared and sustainable growth for a better world. MUFG’s shares trade on the Tokyo, Nagoya, and New York stock exchanges. For more information, visit

The views expressed in this press release represent those of Mr. Halpenny alone and do not necessarily represent those of MUFG or its affiliates. All forward-looking statements herein are as to future events, are not to be viewed as facts, and are subject to significant uncertainties and contingencies.