Another beneficiary of this rotation is the Swiss Franc (CHF). Switzerland’s stability and neutrality saw the CHF surge in safe-haven demand. From 2023, the CHF has appreciated strongly against both the Dollar and Euro. The Swiss National Bank managed to keep inflation in check relative to other central banks during the 2022-2023 hiking cycle and at a time when high-for-longer US yields were battering other havens (Reuters, 2023). The dynamic has persisted into 2024 with the CHF appreciating nearly 8% against the dollar in the first half of 2025 amid renewed trade tensions and US policy uncertainty. The yen, another traditional safe-haven currency, has been more mixed, weighed down by Japanese yield curve policy.
Beyond traditional safe havens, reserve manager and investors are increasingly considering nontraditional alternatives. IMF data shows the US dollar share of global FX reserves has been on a gradual decline falling from about 70% twenty years ago to around 58% by 2024. The increased allocations have been to smaller currencies such as the Australian dollar and Canadian Dollars, Chinese renminbi, South Korean Won, Singapore Dollar and Nordic currencies. These “nontraditional” reserve currencies collectively gained notable share as they offer greater diversification and often higher yields than traditional havens. By 2023, at least 49 countries have more that 5% of reserves in such alternative currencies-a broad-based shift confirming that central banks have indeed been shifting gradually away from the dollar over the past decade (IMF, 2024).
Among Emerging Market (EM) currencies, the Chinese yuan (RMB) has drawn the most attention as a potential safe asset, given China’s economic size being the second largest economy in the world. China has actively promoted RMB internationalisation, establishing cross-border payment systems, extending swap lines and even piloting a digital yuan. These steps alongside China’s role as a top trading partner led many to expect a rising RMB role in reserves, however, recent data show RMB reserve growth stalling. Due to China’s relatively low interest rates and capital controls the RMB’s share has edged downs since 2022 (IMF, 2024).
Figure 3: CHF/USD and Gold Prices since 2020. From late 2022 we see both have risen sharply.
Source: Bloomberg
Figure 4: Falling share of “big four” currencies mirrored bu increasing holdings of nontraditional reserve currencies.
Source: IMF COFER
EM’s are also benefitting from this shift in capital flows, particularly those with high yielding debt and growing trade independence. Countries like China, India, Brazil, Saudi Arabia and Mexico are benefitting from investor rotations out of US treasuries and the dollar. These countries offer strong fundamentals, high-yielding local debt and growing roles in de-dollarized trade. China and Brazil are settling more trade in yuan and reals, India is attracting bond inflows, and Mexico’s peso has surged on stable policy and nearshoring tailwinds. These EM countries are gaining credibility as alternative safe havens driven by stable outlook and monetary policies and investment destinations in more multi-polar world (Lubin, 2024).
In conclusion, investors gradual rotation away from US treasuries as the dominant global safe-haven is a defining shift in the last few years. It is driven by a confluence of factors, a growing US debt burden, increased fiscal spending, higher real yields, geopolitical shock events and US recessionary worries. In response, there has been a shift in global capital allocation towards a multipolar framework, with investors seeking refuge in alternative safe assets like the Swiss Franc, gold, and select EM and DM currencies and bonds which offer reserve diversification.
Shahil Nathoo MSc in Energy, Trade and Finance student at Bayes Business School
E:
shahilnathoo@gmail.com
Bibliography: Arslanalp, S. and Engels, C. (2024) Dollar dominance in the international reserve system: An update. IMF Blog, 11 June. Available at:
https://www.imf.org/en/Blogs/Articles/2024/06/11/dollar- dominance-in-the-international-reserve-system-an-update
Lubin, D. (2024) ‘Emerging Markets’ Two Way Traffic’, Finance & Development, December. Available at:
https://www.imf.org/en/ Publications/fandd/issues/2024/12/point-of-view-emerging- markets-two-way-traffic-david-lubin
Rovnick, N.and Revill, J.2023. Swiss franc shines as investors scramble for safe assets. Reuters. 20th October 2023. Available at: https://
www.reuters.com/markets/currencies/swiss-franc-shines-investors- scramble-safe-assets-2023-10-20/#:~:text=Enter%20the%20 Swiss%20franc%2C%20a,its%20traditional%20rivals%20lose%20 appeal
Storbeck, O.and Hook,L. 2025. Gold overtakes euro as global reserve asset, ECB says. Financial Times, 11 June 2025. Available at: https://
www.ft.com/content/0d175cad-db7c-4dc2-83a8-90736f96f198 (Accessed: 11 June 2025).
World Gold Council (2025) Central banks add 1,045 t to global gold reserves in 2024. Gold Demand Trends Full Year 2024. Available at:
https://www.gold.org/goldhub/research/gold-demand-trends/gold- demand-trends-full-year-2024/central-banks (Accessed: 12 June 2025).
21 | ADMISI - The Ghost In The Machine | Q2 Edition 2025
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