Central banks are accelerating their shift away from the US dollar, a move that has gained traction over the past decade and shows no sign of slowing. “We believe the diversification away from dollar should persist, as this trend has been well entrenched for the past decade,” the Goldman Sachs strategists wrote.

The momentum intensified following the 2022 sanctions on Russia, when Washington froze Moscow’s dollar reserves and cut it off from the global financial system.
Those events rattled confidence in the greenback’s reliability, and concerns have only deepened amid Trump’s policies, which threaten to disrupt global trade and economic stability.
In response, central banks have also been building up gold holdings, supporting demand for the precious metal.

Still, the dollar retains its roleas the primary reserve currency and the standard for pricing key commodities like oil

much of that status stems from the vast liquidity of the US Treasury market, which allows investors to transact large volumes without moving prices—an advantage no other market currently offers
there are signs of erosion – Bloomberg’s dollar gauge has fallen more than 7% since peaking in February, as the narrative of US exceptionalism loses steam

According to the strategists, the dollar is still about 17% overvalued based on Goldman’s valuation models

“We anticipate a rotation to other global assets, of which Asian assets could be a subset”
South Korea, Singapore and China’s currencies are likely to be the biggest Asian beneficiaries

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Summary of a Bloomberg piece citing GS.

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