The multi-trillion dollar question

DESPITE growing debate, the US dollar still dominates global finance.

Yet questions are mounting on whether the world could gradually reduce its reliance on the greenback, and markets are watching closely.

A special report by Nomura Research warns that some countries could face outsized risks if the global financial system begins to shift away from the US dollar.

While the prospect remains uncertain, the report says the exposure of several economies to US financial assets has reached levels that could amplify the impact of even modest portfolio shifts.

The international brokerage says global appetite for US assets has been extraordinary over the past decade.

“The United States’ consistent global economic outperformance, its status as the epicentre of the artificial intelligence (AI) revolution and its exorbitant privilege of issuing the world’s only reserve currency has resulted in seemingly insatiable global demand for US dollar assets,” the brokerage explains

Foreign investors have steadily poured money into US markets since the 2008-2009 global financial crisis. Overseas investors have purchased a net US$2 trillion of US equities since then.

Combined with strong share price gains, foreign holdings of US equities have ballooned to US$21.5 trillion as of September 2025.

That figure now exceeds foreign holdings of US debt securities, which stand at US$15.8 trillion. In total, overseas investors hold US$37.3 trillion worth of US portfolio assets – equities plus debt – compared with US$11.9 trillion in 2010.

Foreign participation

The scale of foreign participation in US markets is also reflected in ownership shares.

According to data from the US Treasury, foreign investors held 33% of outstanding US Treasuries, 27% of US corporate debt and 18% of US equities in 2024.

Yet the report argues that there are limits to how much global capital the United States can absorb.

“The United States’ total net international investment position has swelled from US$2.5 trillion (16% of gross domestic product or GDP) in 2010 to US$27.6 trillion (89% of GDP) as of September 2025,” Nomura Research says.

It adds that if large US current account deficits persist indefinitely, the country could theoretically become increasingly owned by foreign investors – though financial markets would likely impose limits long before that.

The debate around “de-dollarisation” is therefore intensifying. But the brokerage stresses that the term itself covers different scenarios.

Different scenarios

Nomura Research distinguishes between a lighter, cyclical form and a more disruptive structural shift.

“The light version describes a decline in the broad US dollar index, fuelled by a narrowing of US foreign interest rate differentials, increased foreign-exchange hedging of US dollar exposure and high US market valuations that encourage diversification,” it says.

By contrast, a heavier version would involve investors actively reducing their holdings of US assets.

“Heavier versions of de-dollarisation refer to a more structural decline in the broad US dollar index, including an erosion of the status of US dollar as the premier global reserve currency,” it says.

Such a shift could be triggered by events such as a sharp correction in technology stocks tied to AI or a loss of confidence in US institutions.

Still, Nomura Research stresses that the report does not attempt to predict whether such a shift will occur. Instead, it examines which countries could be most exposed if global investors begin to diversify away from US assets.

Most affected

The analysis focuses on foreign holdings of US portfolio assets – equities and debt securities – as these are liquid and can be traded quickly.

In absolute terms, the euro area is the largest holder of US portfolio assets as a bloc. Among individual countries, the biggest holders include the United Kingdom, the Cayman Islands, Canada and Japan.

The data also shows that many offshore financial centres feature prominently in the rankings. These include the Cayman Islands, Luxembourg, Ireland, Switzerland, Belgium, Singapore, Hong Kong and Bermuda.

However, Nomura Research notes that funds recorded in these locations may ultimately belong to investors based elsewhere, making the true origin difficult to trace.

To better gauge vulnerability, the brokerage compares each country’s US asset holdings with the size of its foreign portfolio investments and overall economy. That analysis reveals several economies with particularly high exposure.

Seven countries hold more than half of their total foreign portfolio assets in the United States.

Canada stands out with 91%, followed by the United Kingdom, Israel, Mexico, Colombia, Australia and South Korea.

Some economies also hold US assets worth more than the size of their entire domestic output.

Ireland’s US portfolio assets are roughly three times its annual GDP, while Norway and Singapore hold US assets valued at about twice their GDP.

Another measure highlights heavy exposure to US equities.

Seven countries have more than one-third of their foreign portfolio assets invested in American stocks.

Canada again ranks highest at 65%, followed by Australia, the United Kingdom, South Korea, Israel, Norway and Sweden.

By contrast, only three countries hold more than one-third of their foreign portfolio assets in US debt securities: the Philippines, Brazil and Peru.

China’s exposure is relatively small in comparison. When measured against its total foreign portfolio assets, China ranks 30th, and it falls outside the top 30 when compared with GDP.

The trend since 2019 also shows many countries becoming more reliant on US markets.

Shares of US portfolio assets have increased for several economies, particularly Singapore, Mexico, Australia, the United Kingdom, Canada and Israel.

At the same time, many countries have been gradually reducing their share of US debt holdings. Brazil and China have made some of the sharpest reductions.

A parallel trend is the rapid accumulation of gold reserves by central banks.

According to estimates from the World Gold Council, global gold demand reaches 5,002 tonnes in 2025.

Nomura Research says central banks’ gold holdings reached a market value of about US$5.1 trillion in January 2026, surpassing foreign official holdings of US Treasury securities in September 2025.

The report suggests the shift partly reflects efforts by central banks – particularly in emerging markets (EMs) – to diversify their reserve assets.

“There is little doubt that central banks in many countries – notably in EMs – have made a conscious effort to diversify their foreign reserve assets into gold,” Nomura Research says.

Whether these moves signal the early stages of broader de-dollarisation across the much larger private investment sector remains an open question.