Small Nations' Currencies Gain as US Withdraws from International Stage
The US has been withdrawing from its role in the international order, causing tensions with allies and other countries that use the US dollar for trade and hold it as a reserve currency.
This has raised questions about which currencies will benefit if the US dollar's standing is diminished.
According to some analysts, small, well-governed countries with open capital markets and strong institutional rule of law may be best positioned to gain from this shift.
They argue that these countries' currencies offer features such as a strong independent central bank, free-floating exchange rates, and developed currency derivative markets, which are similar to those offered by the US dollar.
Technological changes, including stablecoins and CBDCs, will also make it easier for international investors to diversify their exposure to small-country currencies.