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Fed independence, US rule of law at risk, UBS reserve managers survey says
Published by Global Banking & Finance Review®
Posted on July 3, 2025
3 min readLast updated: January 23, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on July 3, 2025
3 min readLast updated: January 23, 2026
UBS survey highlights concerns over Fed independence and US rule of law, with potential impacts on global reserve currency status and asset allocation.
By Yoruk Bahceli
LONDON (Reuters) -Two in three reserve managers fear Federal Reserve independence is at risk and nearly half think the rule of law in the United States may deteriorate enough to influence their asset allocation significantly, UBS Asset Management said in a survey on Thursday.
And 35% of close to 40 central banks that responded think that the U.S. might ask allies to convert longer-term debt into other instruments such as ultra-long, zero-coupon bonds.
The results highlight growing concern around the safe haven status of the world's No. 1 reserve currency and biggest bond market given U.S. President Donald Trump's confrontations with longstanding allies over trade and security, and his attacks on the Fed.
Trump's April 2 Liberation Day tariffs hit both the dollar and Treasuries. He has also pressured the Fed to cut rates and his advisers have floated unorthodox ideas to bring the ballooning U.S. debt pile under control.
Max Castelli, head of global sovereign markets strategy and advice at UBS Asset Management, said the concerns showed it was "very clear" how Liberation Day had changed reserve managers' view on the dollar.
Going forward, 29% were looking to cut exposure to U.S. assets in response to recent developments, the survey said.
Over the next year however, 25% of central banks said they expected to cut their exposure to the dollar, after stripping out those who want to increase it, slightly less than the past year.
"When you ask: do you see really a big change in the dominance of the dollar? The answer is no," Castelli said, adding it takes time for reserve managers to move.
Nearly 80% of respondents expect the dollar, which currently accounts for 58% of FX reserves, to remain the global reserve currency.
In the coming year, gold, which UBS ranked against other non-currency assets, was the top winner, with 52% of central banks looking to add it to their holdings.
And 39% of respondents were planning to increase the share of gold reserves they hold domestically, the survey showed.
Castelli said that reflected mainly emerging markets central banks worried about sanction risk, and mainly concerning gold stored in the United States.
Trump's policies have also revived questions in Germany around its central bank's gold reserves, some of which are stored at the New York Fed.
Over the next five years, reserve managers reckon the euro will benefit the most from global shifts, followed by the renminbi and crypto assets, the UBS survey showed.
The dollar dropped from top spot last year to ninth place.
But over the next year, only a net 6% of respondents plan to add the euro, while the renminbi took the top spot with 25%. The Canadian dollar, pound and yen were other currencies that a higher net percentage of respondents were looking to add.
"There is a lot of optimism about Europe. But the expectations are very high, in the sense that if Europe does not deliver on reform, I think this European renaissance will be rather short-lived," Castelli said.
(Reporting by Yoruk Bahceli; Editing by Dhara Ranasinghe and Alexandra Hudson)
Two in three reserve managers fear Federal Reserve independence is at risk.
Nearly half think the rule of law in the United States may deteriorate enough to influence their asset decisions.
Gold is the top asset, with 52% of central banks looking to add it to their holdings.
Nearly 80% of respondents expect the dollar to remain the global reserve currency despite some concerns.
Over the next five years, reserve managers reckon the euro will benefit the most from global shifts.
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