The U.S. dollar remains the world’s reserve currency, but its perceived value is eroding faster than many think.
According to Goldman Sachs’ latest report, a combination of shifting trade dynamics, weaker U.S. economic outperformance, and political risk is setting the stage for gradual depreciation—even without outright de-dollarization.
Dollar Dominance Loses Muscle
In 2025, the trade-weighted dollar index, as broadly tracked by the Invesco DB USD Bullish Fund (NYSE:UUP), has already declined by about 7%. And Goldman isn’t calling that a blip.
Instead, analyst Kamakshya Trivedi sees continued weakening in the months ahead as “less exceptional economic and market performance no longer warrants its high valuation.”
Still, the dollar dominates where it matters most. As of the first quarter of 2025, it commands over 60% of spot foreign exchange trading volumes. That accounts for 50% of SWIFT financial transactions. It also makes up 45% of cross-border debt issuance, and holds a 40–50% share of international loans.
But signs of stress are emerging. The most notable is the composition of the central bank’s reserves. Since 2015, the dollar’s share of global reserves …