By Chris Combs, Chief Investment Officer, Silicon Valley Capital Partners
January 29, 2026
Executive Summary
Recent headlines about “de‑dollarization” miss a quieter, more benign reality. Reserve managers and global investors are diversifying at the margin, not mounting a coordinated exit. The data show a gradual, long-running portfolio rebalancing—largely toward a broader set of liquid, “non‑traditional” reserve currencies and gold—while the U.S. dollar remains the preeminent reserve and transaction currency. 12
Meanwhile, the trade‑weighted dollar has eased off its 2022 peak and is moving back toward multi‑year averages—what I’ll call a “moderation path.” This is reshaping incentives in ways that are broadly supportive for U.S. investment, on‑shoring and productivity, multinational earnings, exports, and foreign portfolio flows—tempered, of course, by the reality that America’s ~two‑thirds consumption share means imported goods will cost somewhat more in dollar terms. 34
Below, I outline eight institutional takeaways—with evidence—to help separate signal from noise.
First principles: No “ill intent” from foreign governments or central banks—just portfolio math
What the data say. The IMF’s COFER dataset shows the dollar’s share of reported global FX reserves hovering around the high‑50s percent—well ahead of the euro at ~20%—even as reserve managers have slowly diversified toward a basket of smaller, liquid currencies over the past two decades. This is a structural, incremental evolution, not an abrupt break. 1
2025 snapshot. In Q1 2025, world FX reserves rose to $12.54T; the dollar’s share dipped marginally to ~57.7% on valuation effects and would have ticked up absent exchange‑rate moves. The renminbi’s share eased to just above 2%. Translation: diversification remains measured, and the USD’s dominance endures. 2
Context from investors. Sovereign investors and central banks are broadening toolkits—especially into gold—while acknowledging that market depth, liquidity, rule of law, and network effects continue to anchor the dollar system. 5
1) The dollar is moderating toward its 5‑ and 10‑year norms—signaling a new (but orderly) trading reality
On both the DXY basket and the Fed’s broad dollar index, the greenback has stepped down from its 2022 highs. Real‑time series show the DXY in the upper‑90s in January 2026, consistent with a glide back toward multi‑year averages after the “policy‑tightening and safe‑haven” surge of 2022. The Fed’s broader, trade‑weighted gauge tells the same story: moderation, not collapse. 63
Why that matters. The IMF characterizes the “global dollar cycle” as a powerful financial barometer: dollar downshifts typically loosen global financial conditions and rebalance trade competitiveness—one reason the current moderation is consistent with an evolving, multipolar trade map rather than a rupture. 7
2) A moderating dollar is a tailwind for inward investment to the U.S.
FDI remains robust. The United States is consistently a top destination for foreign direct investment, underpinned by scale, innovation, legal protections, and deep capital markets. Commerce and BEA data show the U.S. inward FDI position rising to $5.7T at end‑2024, led by Europe and Japan. A softer dollar tends to lower U.S. asset prices in foreign‑currency terms, improving entry points. 89
Global context. UNCTAD’s 2025 and 2024 reports document resilient global FDI, with the U.S. still attracting substantial cross‑border capital across technology, manufacturing, and services—positions that a less‑expensive dollar can reinforce over time. 1011
3) Moderation supports on‑shoring and productivity: robotics, automation, AI infrastructure, and energy efficiency
On‑shoring momentum. Reshoring and U.S. FDI announcements remained elevated through 2023–2024, supported by policy (CHIPS Act, IRA) and a sober reassessment of total landed cost and resiliency. A moderating dollar lowers the relative cost of U.S. capex for non‑U.S. sponsors and tightens the payback math on domestic automation. 1213
AI and data‑center capex. Independent industry trackers show an unprecedented AI‑driven buildout of U.S. digital infrastructure—data‑center construction and cooling spend at records, with hyperscalers and enterprises lifting capex. This “picks‑and‑shovels” cycle (power, cooling, grid upgrades, semis, analog/power management) is a real economy stimulus to U.S. construction and manufacturing. 1415
Grid & energy efficiency. Deloitte’s 2025 infrastructure survey highlights the need to scale power capacity and efficiency as AI campuses proliferate—creating durable investment lanes in efficient energy systems (from liquid cooling to grid interconnects). A somewhat weaker dollar can improve foreign investors’ hurdle rates for these capital‑intensive projects. 16
4) U.S. exports benefit from a less‑expensive dollar—especially in price‑sensitive goods and capital equipment
The classic competitiveness channel still works: a weaker dollar lowers foreign‑currency prices for U.S. goods, supporting export volumes. Empirically, the IMF and BIS have documented how dollar strength tightens financial conditions and can depress trade; the converse (moderation) eases those headwinds and improves exporter credit conditions. Think industrial machinery, aerospace components, energy equipment, medical devices, agri‑tech, and select chemicals. 717
Academic research also links dollar swings to exporters’ financing conditions: when the dollar eases, firms relying on dollar credit face fewer constraints—supporting orders and shipments. 18
5) U.S. equities become more attractive to foreign portfolios—pension funds, sovereign wealth funds (SWFs), and private savers
Valuation effect. A moderating dollar reduces FX headwinds for non‑USD investors buying U.S. assets; dividends and earnings translate more favorably, and entry prices in home currency improve. This matters for global pensions and SWFs that rebalance across regions. 5
Allocation trends. Sovereign studies show continued interest in U.S. technology, infrastructure, and digital assets (data centers, connectivity) even as governance‑minded allocators diversify. The 2024–2025 reviews depict a rotation toward resilient cash‑flow assets—with U.S. digital infrastructure a top target—a trend a softer dollar can accelerate. 19
China’s private flows. While official Chinese reserves remain tightly managed, private sector portfolio channels have intermittently directed surpluses toward U.S. equities and funds; broader sovereign research highlights persistent demand for U.S. public markets given depth and liquidity—conditions a weaker dollar often sweetens. 2021
6) The caveat: a ~68–70% consumption economy will feel some import‑price lift—but corporate margins have room
Consumption share reality. Personal Consumption Expenditures account for roughly two‑thirds of U.S. GDP. As the dollar moderates, import prices can tick up, modestly dampening real purchasing power at the margin. 422
Offset via margins. Corporate profits—and margins—rose markedly post‑pandemic and, while normalizing, remain elevated compared with pre‑2020 in many sectors. That cushion can absorb input‑cost pressures, easing pass‑through to end prices and helping keep any inflation impulse contained. 2324
Policy overlay. The Fed and fiscal authorities watch these dynamics closely; the BIS and IMF stress that exchange‑rate‑driven adjustments are part of a healthy, flexible system so long as inflation expectations stay anchored. 257
7) Multinationals—especially U.S. tech—benefit as foreign revenues translate higher
Mechanism. When the dollar moderates, overseas revenues translate into more USD, lifting reported sales and earnings for firms with large non‑U.S. footprints. This is particularly pronounced in sectors with 40–60% foreign revenue exposure—information technology leads the S&P 500 on that metric. 2627
Evidence. FactSet’s geographic revenue work and sector breakdowns show IT as the most internationally exposed major sector (≈59% foreign revenue in 2023), followed by Materials and parts of Industrials—groups that typically see the greatest EPS beta to a softer dollar. 2827
Why this cycle may be stronger. The concurrent AI capex super‑cycle (chips, power electronics, equipment, software) is globalizing tech demand while U.S. firms retain pricing power and scale advantages. Translation tailwinds plus top‑line momentum is a potent combination in a moderating‑dollar regime. 15
8) A moderating dollar is exactly what a free‑floating system is designed to do
In a world of floating exchange rates, currency moves are safety valves that facilitate orderly adjustments in trade, capital flows, and balance sheets. The IMF’s external sector work frames the “global dollar cycle” as a durable feature of global finance; easing from a strong‑dollar phase is not a crisis—it’s homeostasis. 7
The BIS emphasizes that, even amid fragmentation and hedging shifts, the USD remains central to invoicing, funding, and hedged cross‑border portfolios. Market‑based adjustments—like today’s moderation—allow conditions to normalize without administrative controls. 25
What investors should watch
- Dollar trend vs. long‑run averages. We’re closer to equilibrium after the 2022 peak. Sustained moderation would reinforce the pro‑investment and pro‑exports thesis outlined here. 3
- FDI and on‑shoring capex. Track BEA’s annual position data and project pipes in semis, EV supply chains, and—crucially—AI data‑center infrastructure. 929
- Margins and pricing power. Elevated profit shares can buffer import‑price pass‑through; monitor BEA profits and sector earnings commentary. 23
- Tech’s foreign revenue leverage. Multinationals with 50%+ non‑U.S. sales should see the greatest translation uplift if the dollar continues to ease. 27
- Reserve composition, not “de‑dollarization.” Expect gradual diversification within a dollar‑centric system—not a forced march away from it. 12
Final word
The prevailing story is not that the world is turning its back on the dollar. It’s that reserve managers and global allocators are behaving like prudent fiduciaries—rebalancing at the margin while the dollar, after an exceptional run, settles toward historical norms. For the United States, that moderation is a feature, not a bug: it supports foreign investment, on‑shoring and productivity, exports, multinational earnings, and foreign portfolio flows—with manageable trade‑offs for a consumption‑heavy economy.
In other words: a stabilizing dollar isn’t an omen; it’s a platform.
Chris Combs
Chief Investment Officer, Silicon Valley Capital Partners
Sources (selection)
- IMF, COFER updates and analysis on reserve currency shares; External Sector Report (2023), Ch.2 on the global dollar cycle. 217
- BIS, Annual Economic Report 2025, and Bulletins on the financial channel of the exchange rate. 2517
- Federal Reserve Bank of St. Louis (FRED), Nominal Broad U.S. Dollar Index; BEA/FRED PCE share of GDP. 34
- BEA, Direct Investment by Country and Industry, 2024 (news release). U.S. Commerce, FDI in the United States (2024). 98
- UNCTAD, World Investment Reports (2024–2025). 1011
- Industry and market trackers on data‑center and AI infrastructure. 1514
- FactSet and sector analyses on foreign revenue shares. 2827
- BEA and Federal Reserve analyses on corporate profits and margins post‑pandemic. 2324