By Marc Jones
LONDON, April 8 (Reuters) – Concerns among central banks about geopolitical tensions have surged dramatically this year and are now viewed as the top global risk, according to a new survey of central banks managing more than $9.5 trillion in reserves.
The survey of almost 100 institutions by Central Banking Publications was conducted between January and March. All but a few responses came in before the February 28 strikes on Iran, but tensions had already been mounting and were preceded by January’s row between the U.S. and Denmark over Greenland.
As a result, almost 70% of banks ranked geopolitics as their top risk. That replaced last year’s top worry of U.S. trade protection and marked a sharp jump from 35% that cited geopolitics as the leading worry in 2024, when the war in Gaza last threatened to destabilise the Middle East.
Taking a 5-year perspective, inflation and interest rates remained the most important factors expected to affect reserve management, the survey showed, with just over half of central banks ranking them as their top issue.
However, that is well down from the 76% that cited inflation and interest rates last year, and geopolitics was again heavily cited by almost 30% – double the share of last year.
The survey also showed trust in the dollar being tested. The U.S. currency lost over 12% versus a basket of other top currencies between January last year and this year, although it has reclaimed around a third of the ground since.
Some 80% of reserve managers said they either agree or strongly agree the greenback remains the world’s primary safe-haven currency, though many added its dominance is increasingly being questioned.
All responses in the survey were anonymous, but one Asia-Pacific central banker was quoted as saying: “Over the next five years, global FX reserves managers will rigorously assess whether the U.S. dollar’s role as the dominant global reserve currency continues, amid rising global fragmentation.”
The survey also showed 16% of central banks see the dollar’s role impacting their reserve management decisions over the 5-year timeframe, up from just over 3% last year.
Confidence in U.S. bonds deteriorated markedly too. Only a third of respondents expect U.S. bonds to outperform those of other Group of Seven economies and China, down from more than half last year and over 70% in 2024.
Gold, meanwhile, remains a beneficiary of geopolitical uncertainty. Nearly three‑quarters of central banks reported holding gold in their reserves, up slightly from last year, while almost 40% said they were considering adding exposure.
(Reporting by Marc Jones; Editing by Chris Reese)
