US dollar’s global role at risk – German regulator

The financial supervisory authority in Berlin has warned against “drastic attempts to politicize institutions”

The US dollar’s status as global reserve currency could be called into question as early as this year, the German financial regulator has warned in its annual forecast. According to a report published on Wednesday by the Federal Financial Supervisory Authority (BaFin), the dollar could suffer from funding shortages, geopolitical shocks, and politicization.

The forecast follows the dollar’s worst single-day decline in nearly a year. On Tuesday, the Bloomberg Dollar Spot Index, a key indicator of its strength against other major currencies, recorded its steepest drop since last April, when US President Donald Trump rolled out his sweeping global tariffs agenda.

“The risk remains that markets will question the role of the US dollar as the global reserve currency,” BaFin President Mark Branson said. He warned that “drastic attempts to politicize institutions” could undermine the effectiveness of international cooperation, particularly during an economic or financial crisis.

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The agency also expressed concern over potential “liquidity shortages” caused by geopolitical shocks, calling it a risk “of particular importance.”

This week, Bloomberg reported that traders were betting heavily that the US dollar would continue to fall amid uncertainty over Washington’s policies. According to the outlet, markets were more pessimistic about the dollar’s long-term outlook than at any point since May 2025. Trump earlier dismissed concerns over the currency’s weakness, insisting it is “doing great” and that he wants the dollar to “just seek its own level.”

READ MORE: The dollar is tanking and Trump seems unfazed. Does that make sense?

The IMF reported in October that the dollar’s share of global foreign exchange reserves fell to a three-decade low of 56.3% of allocated reserves between April and June last year. However, it attributed the decline to currency valuation moves rather than intentional sell-offs by central banks.