The 2026 UBS Global Family Office Report highlighted growing concern about the U.S. dollar. With geopolitical tensions and rapidly expanding public debt, nearly 3 in 10 respondents say they have already cut back or are considering cutting back their exposure to dollar-denominated assets.
Should the rest of the investors follow?
Although the dollar’s share of global foreign exchange reserves fell from 59.4% in late 2021 to 56.8% by the end of 2025, broader market indicators like the US dollar index (DXY) still reflect its central role in global finance. The dollar dominates global finance, accounting for about 90% of all foreign exchange transactions.
This is simply because there are no better alternatives. The Chinese yuan, for example, is not freely convertible and is tightly controlled by the state. Capital controls restrict money movement across China’s borders, limiting the yuan’s appeal. No wonder China’s currency didn’t gain much ground as the dollar lost ground. In fact, its share fell from 2.85% to 1.95%, while the euro’s share rose only slightly, from 19.8% to 20.3%. Movements in major currency pairs like EUR/USD tend to reflect this reality
As for the declining share of foreign holders of U.S. government debt, this is largely because U.S. debt has been growing faster than foreign demand for Treasury securities and not because investors are suddenly abandoning them. Once again, there are simply no better alternatives for parking capital.
Now looking at the U.S. national debt, the situation is certainly not healthy, with federal debt surpassing $39 trillion in early May, exceeding 100% of GDP and up from around $36 trillion just a year earlier, yet it is worth keeping in mind that Japan has maintained a substantially higher debt-to-GDP ratio for years without collapsing, and several European countries have also managed to sustain elevated debt levels.
As long as the U.S. economy continues to grow, corporate profits remain strong, and the dollar retains its position as the world’s primary reserve currency, there is little reason to expect an imminent debt crisis. A true debt crisis occurs when investors lose confidence in a government’s ability to manage its finances, and for now, that scenario does not appear to be on the horizon.
Thus, even though Treasury yields have not decreased despite the Fed lowering interest rates, there is still no reason to talk about a debt crisis in the U.S. However, the longer the underlying problems persist, the rating of U.S. debt could be lowered, which could make the market more volatile and lead investors to demand higher risk premiums.
This article was written by IL Contributors at investinglive.com.
