Goldman Sachs Predicts a New Era in International Reserves
According to a recent analysis by Goldman Sachs Group Inc., US President Donald Trump’s aggressive tariff policies are triggering a new wave of global de-dollarization, forcing central banks and market participants to seek alternatives to the US dollar amid rising geopolitical tensions. Asian currencies, particularly the South Korean won, Singapore dollar, and Chinese yuan, could benefit the most from these processes, gradually increasing their share in international reserves and cross-border settlements. This shift represents not merely a short-term reaction to the current political situation but reflects a long-term structural transformation of the international monetary system.
Asian Currencies as Beneficiaries of De-dollarization
In an April 30 note authored by strategists Danny Suwanapruti and Rina Jio, Goldman Sachs notes that while the dollar and euro continue to lead global reserves, allocations to so-called “non-traditional” assets could soon overtake them. “We believe the diversification away from the dollar should persist, as this trend has been well entrenched for the past decade,” the analysts wrote.
Among Asian currencies, the South Korean won stands out as a particularly promising candidate for an increased share in international reserves. According to the analysts, demand for South Korea’s currency could increase due to the nation’s expected entry into the FTSE World Government Bond Index in 2025, opening doors to more international bond investors.
Statistics demonstrate a process already underway: The US dollar traded at 1,420.94 against the South Korean won on Wednesday, a downtick of 11.20 won or 0.78% from the previous trading session. Over the past four weeks, the dollar has fallen 3.54% against the won. However, on a year-over-year basis, the greenback is up by 3.14%.
The Singapore dollar is also showing strengthening against the American currency. Since March 30, the USD has weakened by 2.80% against the Singapore dollar, and over the last 12 months, it has dropped by 4.01%.
“We are witnessing the emergence of a new paradigm in the international monetary system,” comments Victor Chen, an analyst specializing in Asia-Pacific currency markets. “Asian currencies, especially those backed by strong economies and stable financial systems, are becoming increasingly attractive for both investors and central banks seeking to diversify their reserves.”
Chinese Yuan: Strategy for Long-term Dominance
In Eastern Asia, China is taking strategic steps to promote the yuan as an alternative to the US dollar. Chinese President Xi Jinping and his administration are actively working on changing policies to boost international use of the yuan over the greenback.
In early April, the People’s Bank of China (PBOC) expanded its cross-border financial services in Vietnam and Cambodia through China UnionPay, a financial services network controlled by the central bank. The UnionPay expansion includes QR-code-based payment systems that allow tourists and small businesses to use QR codes instead of dollars in daily transactions.
Simultaneously, the PBOC’s offshore yuan swap lines with foreign central banks reached a record 4.3 trillion yuan ($591.2 billion) in February. The PBOC also pledged to strengthen its proprietary international payment system, CIPS, and advance the integration of blockchain technology, the foundation of China’s digital yuan.
“China’s strategy is multifaceted and aimed at the long term,” explains Maria Kovaleva, an expert in international financial systems. “Beijing is using a combination of traditional financial instruments, such as swap lines, with innovative technologies, including the digital yuan and blockchain-based systems, to create a comprehensive alternative to the dominant dollar system.”
These efforts are already yielding results: Bloomberg’s dollar index has dropped more than 7% since peaking in February, after demand across the $7.5 trillion-per-day foreign exchange market weakens by the day.
“The United States weaponizing tariffs has cast doubt over US asset safety,” said E. Yongjian, vice general manager of the Bank of Communications’ research department. “That, in turn, has made yuan assets more attractive, and will help broaden cross-border use of the Chinese currency.”
“Trump 2.0” and Accelerating the End of the Dollar as World Reserve Currency
Since returning to office on January 20, President Donald Trump has implemented the highest tariff barriers around the US economy in over a century. His targets have mostly been countries that do business with China, a strategy that economists believe will hurt the dollar’s dominance as a reserve currency.
At a recent press conference, PBOC Vice Governor Lu Lei said that protectionism and trade friction with the US are forcing Chinese companies investing overseas to move shop away from the West. “Unilateralism, protectionism … and higher tariffs impact the global supply chain,” he reckoned.
Officials within China’s National Development and Reform Commission, like researcher Qu Fengjie, see a scenario in which China outpaces the US in global influence. In what he called “East Rising and West Declining,” Fengjie predicts that cutting the supply chain would favor a stronger yuan and help China “break the old order of the international monetary system.”
“Trump’s trade policy is creating unintended consequences, accelerating the de-dollarization process that was already in motion,” explains Alexander Petrov, director of a global currency markets think tank. “Paradoxically, attempts to protect the American economy through tariffs may undermine one of the key advantages of the US—the dollar’s status as the world reserve currency.”
New Financial Order: Consequences and Prospects
The ongoing changes in the structure of international reserves and payment systems will have far-reaching consequences for the global economy, financial markets, and geopolitics.
First, the diversification of central bank reserves could lead to reduced demand for US government bonds, potentially increasing borrowing costs for the US government and complicating the financing of record budget deficits.
Second, the growing role of Asian currencies could change the structure of international trade, especially in the Asia-Pacific region, where countries may begin to more actively use local currencies instead of the US dollar for settlements.
Third, the strengthening role of the Chinese yuan could potentially enhance China’s geopolitical influence, especially among countries participating in the Belt and Road Initiative, which already have close economic ties with Beijing.
“We are observing not just a short-term fluctuation in exchange rates, but a fundamental shift in the architecture of the international financial system,” asserts Elena Sokolova, a professor of international finance at the Higher School of Economics. “This transition from a unipolar dollar system to a more multipolar currency environment will be gradual, but its consequences will be felt for decades.”
For investors and businesses, these changes create both challenges and opportunities. Companies operating in international markets will need to develop more sophisticated strategies for hedging currency risks in a world where dollar dominance is no longer absolute. Investors will need to reassess their portfolios in light of changing dynamics in currency markets and potential redistribution of global capital flows.
At the same time, the transition to a more multipolar currency system could contribute to greater stability of the world economy in the long term, reducing risks associated with excessive dependence on a single reserve currency and the financial policy of one country.
As this process gains momentum, the role of international organizations such as the International Monetary Fund and the Bank for International Settlements in coordinating and managing a multipolar currency system is likely to increase, creating a new architecture of global financial governance for the 21st century.