Yuan, Singapore gain ground

GROWING demand for and usage of yuan trade settlement and the emergence of Singapore as a relative safe-haven destination shape Asia’s diversification landscape.

This sits alongside a broader shift in global portfolios away from the US dollar system as capital searches for alternative assets and centres, according to Nomura Research.

“The two big trends in Asia on diversification and the reduced role of the US dollar have been the increased usage of yuan and the emergence of Singapore as a relative safe haven for wealth,” it highlights in a recent report.

Nomura Research observes that US dollar dynamics have been central to recent market positioning shifts.

It states that the fading of US exceptionalism and weakening of US dollar were strong themes in the first half of 2025 (1H25), owing to the emergence of DeepSeek, US Federal Reserve independence risks, foreign-exchange (forex) hedging, US President Donald Trump’s tariff and non-tariff policies, and a sharp drop off in foreign portfolio inflows into the United States.

However, it also notes that since the 2H25, the US dollar has stabilised, supported by a relatively stronger US macroeconomic and equity performance, even if this remains weaker than the prior US exceptionalism phase.

Losing appeal

According to Nomura Research, portfolio flows are increasingly diversifying away from the United States into other developed markets (DMs), including the eurozone, Japan, Australia and Switzerland, as well as selected parts of Asia.

“Net inflows into DMs accelerated further to US$447bil in the fourth quarter of 2025 (4Q25) after a strong average US$325bil in 2Q25 and 3Q25 (average US$225bil in the four quarters to 1Q25),” it points out.

The asset manager adds that inflows are concentrated in eurozone and Japanese bond markets, while Asian inflows remain more selective, including Hong Kong, Singapore and South Korea, though South Korea saw volatility in early 2026.

At the same time, official sector diversification away from US dollar continues at a structural level.

“US dollar accounted for as much as 71.4% of total forex reserves in 2Q01, and has fallen to a low of 56.8% of global forex reserves by 4Q25,” Nomura Research states.

It also notes that this long-term shift reflects gradual reserve rebalancing across currencies, with Japanese yen, euro, yuan and other currencies gaining share over time.

Gold also plays an increasingly important role in reserve and portfolio diversification, with Nomura Research highlighting that central bank holdings of gold as a percentage of forex reserves increased from 9.1% in 4Q15 to 26.6% by 4Q25.

The data shows steady accumulation across major reserve holders, alongside growing private investment demand through physical holdings and exchange-traded funds (ETFs), reinforcing gold’s role as a non-fiat alternative within global allocation strategies, it says.

Within Asia, yuan usage continues to expand, particularly in trade settlement.

Nomura Research notes that from February 2022 to March 2026, yuan trade settlement surged from 15% of total trade to 31.7%.

It attributes part of this increase to shifts in settlement behaviour following sanctions-related disruptions in global payments systems, alongside broader adoption by emerging markets and regional trade partners.

However, the brokerage also points out that structural constraints remain, including China’s relatively closed capital account and regulatory controls, which limit full internationalisation of the currency.

Structural constraints

Despite rising usage, yuan internationalisation remains partial in capital markets.

Foreign participation in Chinese equities and bonds remains modest, reflecting continued constraints in market access and policy frameworks.

Even as trade settlement expands, reserve adoption by global central banks remains comparatively low, indicating that yuan’s role is still evolving within the broader monetary system.

Meanwhile, Singapore’s position as a regional financial hub has strengthened as capital seeks stability and efficient wealth management channels.

Nomura Research notes that Singapore benefits from a combination of legal, fiscal and institutional strengths, including a strong legal system; financial strength, for instance, in terms of forex reserves, AAA sovereign rating and fiscal position; foreign policy credibility; global financial hub status; political/social stability; strong crisis management track record; and the government’s forward-looking strategic/economic drive.

This positioning is reflected in wealth flows and banking data.

Nomura Research reports that Singapore banks DBS, OCBC and UOB attracted a combined S$77bil in new wealth money in 2025, bringing asset under management from these three banks to S$1.03 trillion.

It also notes rising non-resident deposits and official reserves during periods of geopolitical stress, highlighting Singapore’s role as a regional liquidity destination.

Safe haven

However, limitations remain in Singapore’s ability to function as a global reserve currency.

“While Singapore has achieved relative safe-haven status, it is far from being a global reserve currency, with the government previously saying that the Singapore dollar should not be internationalised because of the potential loss of influence on the exchange rate (forex policy regime), and Singapore’s status as a small/open economy,” Nomura Research says.

It also points to structural constraints such as the smallish local government bond market size at US$1 trillion, or about 1.2% of world market, and the local equity market cap at a modest US$638bil, or about 0.5% of world.

These factors shape its role as a safe-haven financial centre rather than a full reserve currency alternative.