De-dollarization agendas could spike South Korea, Singapore and China’s currency usage: Goldman Sachs

Global central banks could be looking beyond the US dollar after US President Donald Trump slapped countries with tariffs, causing geopolitical risks and economic uncertainty.

According to analysts at Goldman Sachs Group Inc., Asian currencies, such as the South Korean won, the Singapore dollar, and the Chinese yuan, could benefit the most from de-dollarization agendas.

In an April 30 note authored by strategists Danny Suwanapruti and Rina Jio, Goldman Sachs said the dollar and euro continue to lead global reserves, but 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.

China, South Korea and Singapore could attract more reserves

According to the analysts, the 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.

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%.

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%.

In Eastern Asia, Chinese President Xi Jinping and his administration are pleading with other countries and 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.

Meanwhile, 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 tariffs are breaking USD dominance

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.”

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