Dollar confidence collapses, will the RMB account for 10% of global reserves? Why does UBS suddenly turn optimistic?

UBS Asset Management’s latest statement has attracted attention: if U.S. policy uncertainty intensifies and pressures in the U.S. debt market increase, the proportion of RMB in the foreign exchange reserves of global central banks is expected to rise to about 10% in the medium term. This forecast reflects a judgment that the global financial landscape is undergoing profound changes.

Why Can the RMB Reserve Share Double?

Maximiliano Castellini, Head of Global Sovereign Market Strategy at UBS, provides a straightforward logic: investors are increasingly concerned about U.S. policies, which drives the demand for portfolio diversification. In other words, when the dollar is no longer the sole “safe haven,” the attractiveness of the RMB as an alternative reserve currency will rise.

What are the trigger conditions

According to UBS’s analysis, this shift requires several conditions to occur simultaneously:

• Increased pressure in the U.S. debt market
• Escalation of political interference targeting the Federal Reserve
• Deterioration of the overall credibility of the United States

These conditions are not hypothetical but are realities currently unfolding. According to the latest news, the U.S. Supreme Court is hearing the case of Trump v. Federal Reserve Board, which involves whether the President can freely replace Federal Reserve officials. UBS has issued a warning that if the White House wins the case, it could set a precedent for bypassing legal procedures to remove Fed officials, which would directly weaken the Fed’s independence and shake global confidence in the dollar.

The consensus on a weak dollar has already formed

It’s not just UBS that is concerned. Top investment banks like Morgan Stanley and UBS have predicted that as the Federal Reserve enters a rate-cutting cycle, the dollar may continue to weaken or even depreciate significantly over the next year. Behind this expectation are narrowing interest rate differentials, high fiscal deficit pressures, and subtle changes in confidence in dollar assets.

The record highs in gold and silver are the most direct reflection of this change. When investors lose confidence in the dollar, they naturally turn to traditional safe-haven assets and then shift to other reserve currencies.

What Does This Mean

Raising the RMB share from the current level to 10% may not seem like a large increase, but it signals an important shift in the global reserve landscape.

Reshaping the global reserve pattern

The U.S. dollar has long held an absolute dominance in global foreign exchange reserves. The increase in the RMB share reflects that central banks worldwide are consciously reducing reliance on a single currency. This is not just a bullish outlook on the RMB but also a “gentle de-dollarization” of the dollar’s dominant position.

Changes in investor behavior

UBS emphasizes that the driving force behind this shift is “investors increasing portfolio diversification amid growing concerns over U.S. policies.” This indicates that diversification of reserves is no longer optional but an inevitable trend.

Possible Future Developments

If the independence of the Federal Reserve is truly threatened by political interference, this timeline could accelerate. The current political uncertainty in the U.S. is already boosting demand for safe-haven assets, with gold, silver, and other alternative assets experiencing capital inflows.

In this context, the strengthening of the RMB as one of the main reserve currencies is almost inevitable. But this also means that the global financial system is undergoing a deep redistribution of confidence, not just a simple adjustment in currency proportions.

It is worth noting that this shift is also driving the rise of new alternative solutions like DeFi stablecoins. When the traditional reserve currency system itself faces doubts, decentralized financial solutions are gaining more attention.

Summary

UBS predicts that the RMB reserve share will rise to 10%, and this is not an isolated view but an accurate description of the ongoing reshaping of the global financial landscape. The erosion of confidence in the dollar is not sudden but the result of long-term accumulation of pressures in the U.S. debt market, political risks, and concerns over U.S. policies.

The key to this shift is that it is passive and forced, not an active choice. When the dollar can no longer provide an “absolute safety” guarantee, diversification of reserves becomes a rational decision. The increase of the RMB share to 10% may just be the beginning of this process, not the end. The restructuring of the global financial system has only just begun.