Many emerging market currencies are currently under severe pressure, not only from macroeconomic uncertainties but also from geopolitical tensions. Many EM countries are undergoing strategic rebalancing and looking for alternatives to the dominance of the US dollar.
Gold Instead of the Dollar: A Quiet Turnaround
Central banks from countries with close ties to China are increasing their gold reserves at the expense of USD investments. Gold offers them independence, physical control and, more recently, better returns than US Treasuries. This trend also reflects a growing distrust of US fiscal policy.
Declining Confidence in US Bonds
While US investors continue to invest in Treasuries, interest abroad is waning. The idea of imposing 0% bonds to reduce refinancing costs is unlikely to find much favour internationally. Constraint breeds avoidance – both economically and geopolitically.
New Alliances – New Markets
Many EM countries – especially the BRICS – are increasingly freeing themselves from economic dependence on the US. China is becoming the central point of reference, not only in Africa and Latin America, but also in Asia, where trade volumes with China have long exceeded those with Western countries.
South Africa – Structurally at the Limit
South Africa remains economically fragile: high debt, stagnating commodity production and massive unemployment. Although direct exposure to the US is low, global risk-off sentiment makes the country particularly vulnerable.
Conclusion
The decoupling from the dollar is gaining momentum. Gold buying, new trade axes and political alliances are all evidence of this: Emerging markets are increasingly thinking geopolitically – and acting accordingly. For investors, this means that one-sided dollar strategies will fall short in the future.
