Fact Check: The US dollar's status as the world's reserve currency is being eroded.

Fact Check: "The US dollar's status as the world's reserve currency is being eroded."

What We Know

The U.S. dollar has long been regarded as the world's primary reserve currency, but recent developments have raised questions about its stability. In the first half of 2025, the dollar experienced a significant decline, falling over 10% against a basket of major currencies, marking its worst performance in more than 50 years (source-1, source-2). This decline has been attributed to a combination of factors, including market volatility, expectations of slower U.S. economic growth, and aggressive trade policies that have created uncertainty among investors (source-1, source-2).

Despite these challenges, many experts assert that the dollar's status as the world's reserve currency remains intact. For instance, a survey indicated that over 80% of central banks still view the dollar as providing unmatched safety and liquidity, suggesting that while there is diversification in currency reserves, it does not equate to a loss of confidence in the dollar (source-1). The dollar's dominance is also supported by its deep and liquid bond market, which continues to attract global investors (source-1).

Analysis

The claim that the U.S. dollar's status as the world's reserve currency is being eroded is nuanced. On one hand, the dollar's recent decline is alarming and indicative of shifting investor sentiment. The sharp drop in value has led to discussions about the future of U.S. economic leadership and raised concerns about the sustainability of U.S. fiscal policies, including rising national debt and potential rate cuts by the Federal Reserve (source-2, source-5).

However, the assertion that this decline signifies a definitive erosion of the dollar's reserve status is contested. Experts like Ed Al-Hussainy argue that there is "no alternative" to the dollar at present, emphasizing that its foundational strengths—transparency, liquidity, and a trusted legal framework—are crucial for its continued dominance (source-1). Furthermore, while central banks are diversifying their reserves, this is characterized more as a strategic pivot rather than a wholesale abandonment of the dollar (source-1).

The sources consulted provide a mix of perspectives. While some highlight the dollar's vulnerabilities and the potential for a shift in global currency dynamics (source-3, source-4), others maintain that the dollar's position remains robust despite recent fluctuations (source-1, source-6).

Conclusion

The claim that "the US dollar's status as the world's reserve currency is being eroded" is Partially True. While the dollar has faced significant challenges, as evidenced by its sharp decline in value and increasing diversification among central banks, it still retains a dominant position in global finance. The foundational strengths of the dollar, including its liquidity and the trust in U.S. financial systems, suggest that while its status may be under pressure, it is not on the verge of collapse. The current situation reflects a recalibration rather than a definitive erosion of the dollar's reserve status.

Sources

1. Dollar Slides in 2025 but Holds Global Reserve Status
2. What triggered the sharpest dollar drop in 2025?
3. De-dollarization: The end of dollar dominance? | J.P. Morgan
4. IMF Data Reveals Historic Decline In US Dollar Reserves
5. What the Dollar’s Decline Reveals About America
6. Why is the US dollar falling by record levels in 2025?
7. The Future of the U.S. Dollar as the World’s Reserve Currency