Investors Are Dumping US Assets & Dollar Amid Geopolitical Tensions—Here’s Where They’re Going
Geopolitical tremors are triggering a seismic shift in global capital flows. As tensions escalate, a quiet but accelerating exodus from traditional US-denominated safe havens is underway. The dollar's long-held dominance is facing its most serious challenge in decades.
The Great Unwinding
Portfolios are being reconfigured in real-time. Institutional money is seeking exits from Treasury bonds and equity markets perceived as overexposed to political risk. This isn't a minor reallocation—it's a fundamental reassessment of the global financial order's bedrock.
Digital Frontiers Beckon
Where is the capital landing? A significant portion is flowing into asset classes untethered from any single nation's monetary policy or political drama. Sovereign wealth funds and hedge funds are increasingly allocating to digital assets, viewing blockchain-based stores of value as a geopolitical hedge. Gold is having a moment, but so are Bitcoin and a select few cryptocurrencies with proven institutional infrastructure.
The New Safe Haven Playbook
This movement bypasses traditional gatekeepers. Direct custody solutions, tokenized commodities, and decentralized finance (DeFi) protocols are absorbing flows that once automatically parked in New York or London. The playbook for preserving wealth is being rewritten—and it's looking more distributed by the day. After all, nothing makes an investor embrace decentralization faster than watching central banks weaponize a currency.
The tide hasn't fully turned, but the direction is clear. The era of automatic dollar supremacy is over. The next chapter of finance will be written on a more fragmented, and arguably more resilient, global ledger.
China signals support as markets reach new highs
Markets received an encouraging signal when China’s central bank set its daily yuan rate above the key 7-per-dollar threshold for the first time in more than two years. This MOVE showed officials are comfortable with the yuan’s recent strength. Meanwhile, South Africa’s main stock index was headed for its third straight weekly gain, while gold prices hovered just below $5,000 per ounce.
The shift represents a historic moment for emerging markets, with their main stock index reaching an all-time high. While Asian technology stocks initially led the charge, other regions are now catching up fast. The benchmark covering Europe, the Middle East and Africa climbed every day this week and is tracking toward its strongest month since 2020. Latin America’s stock index hit its highest point since 2018 on Thursday and added another 0.8% on Friday.
Tensions over Greenland, though somewhat eased for now, have raised fresh doubts about American dominance and the dollar’s global standing. This has pushed funds from Europe to India to reduce their holdings in U.S. Treasury bonds. The trend is adding fuel to an emerging market rally already powered by strong worldwide economic growth, massive spending on artificial intelligence technology, and political changes across Latin America, along with responsible budget and monetary policies in many developing nations.
“People are looking to diversify away from US assets, and I WOULD kind of describe it as quiet-quitting of US bonds,” said Katie Koch, who heads TCW Group Inc., speaking on Bloomberg Television. “I don’t think there’s going to be a massive announcement, I just think they’re going to look for opportunities to diversify away.”
Currencies strengthen as gold purchases continue
Currency markets tell a similar story. The Brazilian real and the pesos of Colombia and Chile have all strengthened by more than 3% in 2026. Poland’s central bank, identified as the world’s largest reported gold purchaser, announced plans on Tuesday to buy an additional 150 tons of the precious metal.
The numbers are striking. The iShares Core MSCI Emerging Markets ETF, a $135 billion fund that buys emerging market stocks, has pulled in over $6.5 billion just in January. This puts it on pace for the biggest monthly influx since the fund started in 2012.
“EM assets are one of the key beneficiaries from stronger global growth,” wrote Oliver Harvey, a strategist at Deutsche Bank in London. “And when opportunities to express a positive growth view have been constrained in developed markets, the outlook is even more bullish for EM.”
However, the pace of investment into emerging markets can slow when global tensions rise, partly because there are fewer developing nation assets available compared to the United States. The total value of emerging markets stands at roughly $36 trillion, about half the size of the $73 trillion U.S. market.
Some investors may still favor U.S. markets as attention returns to the growth gap with Europe after the recent period of heightened stress, according to Citigroup Inc. strategists Rohit Garg and Gordon Goh.
“That said, the de-dollarization and fiscal profligacy themes are back,” they noted. “De-dollarization has the potential to impact EM risk premia in a positive way, as was the case in 2025.”
Get seen where it counts. Advertise in Cryptopolitan Research and reach crypto’s sharpest investors and builders.
