Is U.S. Cash Still King?

By Jason Flores – Executive Vice President & Chief Investment Officer

There has been a trend of pronouncing the death of the dollar on the world stage earlier this year. Along with this trend, there has also been a rise in fear regarding quality of life and what the death of the dollar will mean for U.S. citizens. Stoking some of these fears is the uptick in trade agreements made using native currencies of countries rather than the dollar. While no one can predict the future; the dollar is still the most dominant reserve currency in the world.

Global Dominance of the U.S. Dollar: Current Trends and Future Outlook

According to the International Monetary Fund, in the third quarter of 2025, the dollar represented 56.3% of all foreign exchange reserves. The Euro was second with over 20.0%. The Chinese Yuan came in at 2.1%. The most recent data from the Bank of International Settlements shows the U.S. Dollar was on one side of 89.2% of all trades, as of April 2025. The Euro was on one side of 28.9% of all trade, with the Chinese Yuan accounting for 6.4%. Suffice to say, based on these data points, the dollar still remains important in the global financial system. Some pundits may point to the recent decline in the value of the dollar compared to other currencies as a sign of the dollar losing status.

The U.S. Dollar’s Global Influence and the Push for Alternatives

The dollar’s role in the global economy has allowed our government and companies to transact more cheaply and enjoy lower costs than foreigners that use the dollar. It has also allowed the U.S. to have a large influence in global economics and politics. These are the reasons that other countries are looking for alternatives to the dollar. Global payments systems routed through the U.S. have been used to sanction countries such as Russia and Iran. Also, decisions from the Federal Reserve Bank on interest rates have an impact on countries around the world. Emerging market countries typically issue debt in dollars. If the dollar moves up in value, it makes it difficult for these countries to pay debts. Commodity-producing countries suffer when the dollar strengthens. Commodity prices tend to fall when the dollar strengthens, impacting revenue.

The difficult part of getting rid of the dollar is finding a replacement. Any reserve currency that is sponsored by a government will give that government the same leverage the U.S. currently holds. Every other current contender is backed by an entity with its own set of issues whether the Eurozone, Japan, or China. This has led to calls for a cryptocurrency, such as Bitcoin, which is not backed by any country. Having a currency that is free from politics is a utopian idea. This doesn’t seem likely, as governments like power and control. Giving up control over currency seems to be a sure way to lose both.

Challenges to the U.S. Dollar’s Reserve Status: Political Factors and Global Shifts

The greatest threat to the dollar falling from reserve status is most likely from U.S. politics pushing people away. The frequent use of sanctions noted previously, and the current political polarization have other countries rethinking the dollar. Repeated showdowns over the debt ceiling in the last decade, and excessive levels of debt take a toll on the credibility of the dollar. Without a clear challenger to the dollar currently, the most likely path seems to be a more fragmented global payments system with each country trying to use its own currency in more transactions. These changes typically take place over decades, not years.

There is reason to be concerned but not alarmed. The dollar’s role in the global economy has provided many benefits to the U.S. Continued erosion of dominance could see these benefits reverse. However, the fear that the dollar will fall to zero and be worthless is highly speculative and overblown. The previous global reserve currency, the pound sterling, still holds value nearly 80 years after the dollar usurped it. Other currencies have value even though many have never enjoyed reserve status.

Potential Future Economic Paths and the Role of Precious Metals in Diversified Portfolios

If the dollar were to fall significantly, the cost of imports would materially increase. The counterbalance is that goods produced domestically would be competitive in price both domestically and across the globe. There are a variety of different paths that the dollar and global economy can take in the future. Current trade agreements may be a distant memory in five or ten years, and the trend of using different currencies could accelerate.

Gold is an important hedge for currencies around the globe. The increase in the price of gold, due primarily to central banks buying, could accelerate the trend of bilateral trade agreements using native currencies rather than the dollar. In 2024, Gold passed the Euro to become the second largest reserve holding in the world. This massive increase in gold holdings by central banks gives credence to the idea of more bilateral trade agreements using native currencies rather than the dollar. However, other currencies are more likely to be displaced first.

For now, U.S. cash is still king, but there are several challenges to maintaining this dominance in the years and decades to come.