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A European private wealth manager in Hong Kong told me last week he recently got the catalyst he needed to land a Taiwanese billionaire’s account: geopolitics.

The billionaire was down to two major wealth managers — UBS and JPMorgan Chase — after Credit Suisse’s demise last year. He wanted a third bank but did not want to increase exposure to the Americans.

The Taiwanese tycoon’s worry, the banker said, stemmed from the uncertainty caused by China-US tensions: What if the Americans turned against people like him, or US banks came under pressure to pull back from business there?

In recent years, as the Sino-US saber rattling has increased, I have repeatedly heard from sources in the United States about how companies and investors are de-risking from China, building resiliency in their supply chains, reducing their exposure, and putting a higher risk premium to business there. China is still too big a market to ignore or abandon, they say, but they need a backup, a ‘China plus 1’.

Over the past few days in Hong Kong and Singapore, conversations with more than a dozen senior bankers, officials and investors show the same de-risking is happening on the other end of the world with equal urgency. People are asking what’s their ‘America plus 1.’

Wealthy people like the Taiwanese billionaire are diversifying their assets and exposure away from the United States. Companies are looking for additional funding sources from other parts of the world, such as the Middle East, and building factories in places like Southeast Asia. And they are thinking about how to reduce their dependence on the dollar, these sources said. The sources requested anonymity to speak freely because of the sensitivity of the subject.

These conversations provide a window into how geopolitics is impacting investment decisions in the East. And as these worries lead to actions, they highlight the risks of further fragmentation of the global economy, with attendant consequences, such as inflationary pressures.

It is also clear from these conversations, however, that any such decoupling is unlikely to be complete and will take years, if not decades, given the dollar’s dominant position. One top banker in the region said companies and investors in Asia still want access to the United States as the deepest, most liquid market in the world.

But there appears to be new urgency around these conversations as people see tensions escalate with measures such as tariffs and sanctions. One Singapore-based banker said in the past when people talked about replacing the US dollar, they would talk in terms of 20-30 years; now, they talk about 10-15 years.

US sanctions following Russia’s invasion of Ukraine have brought home the realization that Western authorities can seize assets in a conflict. That has been compounded by worries about the sustainability of US debt levels and the impact on the dollar, the banker said, leading people to ask “why do I have to hold US dollar assets?”

The conundrum can be seen in the data. The US dollar still accounts for nearly 60% of forex reserves, but there has been a gradual diversification away from it, according to the International Monetary Fund.

And while SWIFT data shows the dollar dominating trade finance with an 84% share, the yuan last year became the most widely used currency for cross-border transactions in China for the first time.

In Asia, discussions with sources show more efforts afoot to chip away at that reliance on the US dollar.

The central banks of China, Hong Kong, Thailand, and the United Arab Emirates, for example, are developing a cross-border settlement system that would allow participating banks to settle transactions in local currency.

More central banks are expected to be invited to join as it is further developed.

A search for alternatives to the United States is also happening among some companies. Chinese companies, for example, were looking to places like the Mideast for funding, one China-focused investment banker at a global lender said. He pointed to electric vehicle maker Nio’s USD 2.2 billion deal with an Abu Dhabi investor. “This would have gone to the US in the past,” the banker said.

A top banking executive said companies still wanted to go to the United States, but those such as fast fashion retailer Shein — forced to look for an initial public offering in London after running into hurdles in New York — were being pushed away.

The geopolitics is making everyone think “do I have to have” an alternative, the banker said, adding it had “propelled people to make conscious choices.”

While there is little one can do about it in the near term, the banker said thinking a decade out, people are beginning to ask, “How much do I lean on the dollar?”

(Reporting by Paritosh Bansal; Editing by Anna Driver)

Japanese consumer confidence and Australian inflation are the main points of focus for markets in Asia on Wednesday, as investors ponder the broader implications of a widespread rise in bond yields.

US Treasury yields, the benchmark for global borrowing costs, rose to four-week highs on Tuesday in the wake of a weak US debt auction, leading to a mixed performance on Wall Street.

The Dow fell, the S&P 500 was flat and Nvidia’s extraordinary rally powered the Nasdaq to a fresh record high – shares in the AI poster child have soared 20% in the last three trading days and the firm is now worth USD 2.8 trillion.

But Asian markets on Wednesday may be more sensitive to the tightening of financial conditions from US yields than the US tech boom. Some analysts reckon the 10-year Treasury yield may now be entering a higher range of 4.50% to 4.70%, and the two-year yield is knocking on the door of 5.00% again.

Closer to home, Japanese Government Bond yields are also under renewed scrutiny. Yields are making new multi-year highs across the curve, prompting a flurry of comments from Japanese and global officials in recent days.

The 10-year JGB yield rose for an eighth straight day on Tuesday to hit a fresh 12-year high of 1.035%, and the 2-year JGB yield inched up to a new 15-year peak of 0.36%.

Bank of Japan Governor Kazuo Ueda on Saturday said the bank’s ‘basic stance’ is that long-term bond yields should be set by markets. But this is difficult for the BOJ, which has for years been hoovering up JGBs in its battle against deflation and now owns more than 50% of the entire market.

Higher bond yields raise the BOJ’s interest bill. A lot.

On the other hand, higher JGB yields could support the yen, which officials would probably welcome – Japan’s finance minister on Tuesday said he was more concerned about the downside of a weak exchange rate right now, namely the increased burden on companies and consumers from higher import prices.

Do JGB yields take a breather here? BOJ data on Tuesday sent out mixed signals on inflation – corporate services prices are rising at their fastest pace since 2015, but other data show key measurements of underlying inflation falling below the bank’s 2% target for the first time since August 2022.

If ‘higher for longer’ JGB yields boost the yen, Japan Inc. could feel the squeeze. The weak currency has attracted huge foreign investor flows into Japan, but with further ‘material’ weakness no longer likely, HSBC strategists are closing their overweight position in Japanese equities.

Here are key developments that could provide more direction to markets on Wednesday:

– Australia inflation (April)

– Japan consumer confidence (May)

– IMF’s Gita Gopinath briefs media following IMF’s annual assessment of the Chinese economy

(Reporting by Jamie McGeever; Editing by Josie Kao)

Gold prices gained on Tuesday, helped by a weaker dollar as investors look forward to US inflation data due later this week for more clarity on interest rate cut timings.

Spot gold was up 0.3% at USD 2,357.44 per ounce by 1:55 p.m. ET (1755 GMT). US gold futures settled 0.9% higher at USD 2,356.5.

“The dollar index is down and we are seeing the yield curve rates drop a little bit. Gold is coming off a correction and is hovering around resistance levels and now it’s bouncing again,” said Bart Melek, head of commodity strategies at TD Securities.

“We continue to be fairly optimistic on gold. I still think that ambiguity of Federal Reserve monetary policy may very well keep gold from taking off and moves be very much data dependent going forward.”

The dollar slipped to a more than one-week low, making gold less expensive for other currency holders.

Focus this week will be on the US core personal consumption expenditures price index (PCE), the Fed’s preferred inflation gauge, due on Friday.

Fed meeting minutes released last week showed that the policy response, for now, would involve maintaining the benchmark rate at its current level.

Traders are pricing in about a 63% chance of a Fed rate cut by November. Lower interest rates reduce the opportunity cost of holding non-yielding gold.

“Gold prices are likely to remain fairly supported by buying-on-dips demand and central bank diversification,” said Amelia Xiao Fu, head of commodity market strategy at Bank of China International.

Demand from global central banks for gold has been elevated for two years as they diversify their foreign currency reserves.

Meanwhile, global physically backed gold exchange-traded funds (ETFs) saw net outflows of 11.3 metric tons last week, according to the World Gold Council.

Silver gained 0.9% to USD 31.95 after a 4.4% jump on Monday. Platinum climbed 0.3% to USD 1,057.10. Palladium eased 1.1% to USD 978.00.

(Reporting by Brijesh Patel in Bengaluru, additional reporting by Polina Devit in London; Editing by Ravi Prakash Kumar and Alan Barona)

Gold prices jumped 1% on Monday after a two-week low hit in the previous session as investors assessed diminishing bets of U.S. interest rate cuts ahead of a key inflation report due later in the week.

Spot gold was up about 1% to USD 2,355.60 per ounce as of 10:05 a.m. ET (1405 GMT), having touched its lowest since May 9 at USD 2,325.19 on Friday.

Most of the markets in the US are closed for the Memorial Day federal holiday.

Bullion hit a record high of USD 2,449.89 last week, but has shed more than $100 since then.

“Gold has suffered from more hawkish perceived comments from Fed officials and better-than-expected U.S. economic data, with market participants again shifting back the timing of the first Fed rate cut,” UBS analyst Giovanni Staunovo said.

Federal Reserve officials indicated that it would likely take longer than previously anticipated for inflation to fall to 2%, the minutes of its latest policy meeting showed last week.

Fed Governor Christopher Waller said on Friday it’s possible that a key underlying interest rate that influences the potency of monetary policy may rise in the future after years of declines, but it’s too soon to say if that will happen.

While gold is often considered a safeguard against inflation, higher rates increase the opportunity cost of holding the non-yielding asset.

Investors are now waiting for the April reading on the personal consumption expenditures (PCE) price index, the U.S. central bank’s preferred inflation gauge, which is due on Friday.

Traders are currently pricing in a roughly 62% chance that the Fed will cut rates in November, according to the CME FedWatch tool, compared to about a 63% chance on Friday.

“We expect gold prices to stay volatile, and price setbacks to be shallow, targeting gold prices to test new record highs later this year,” UBS’ Staunovo said.

Spot silver rose 3.6% to USD 31.42. It hit an 11-year high last week.

“Silver has outperformed gold this year, and this trend is likely to continue,” Staunovo said.

Platinum climbed 2.7% to USD 1,052.75, and palladium rose 2.9% to USD 991.11. Both metals were up 3% earlier in the session.

(Reporting by Daksh Grover in Bengaluru; Editing by Andrea Ricci)