Latest news with #de-dollarisation
Yahoo
12 hours ago
- Business
- Yahoo
Analysis-Under shadow of Trump warning, Africa pioneers non-dollar payments systems
By Duncan Miriri NAIROBI (Reuters) -Africa's push for local currency payments systems - once little more than an aspiration - is finally making concrete gains, bringing the promise of less costly trade to a continent long hobbled by resource-sapping dollar transactions. But efforts to move away from the dollar face strong opposition and the threat of retaliation from U.S. President Donald Trump, who is determined to preserve it as the dominant currency for global trade. The move by Africa to create payments systems that do not rely on the greenback mirrors a push by China to develop financial systems independent of Western institutions. Countries like Russia, which face economic sanctions, are also keen for an alternative to the dollar. But while that movement has gained a sense of urgency due to shifting trade patterns and geopolitical realignments following President Trump's return to the White House, African advocates for payment alternatives are making their case based on costs. "Our goal, contrary to what people might think, is not de-dollarisation," said Mike Ogbalu, chief executive of the Pan-African Payments and Settlements System, which allows parties to transact directly in local currencies, bypassing the dollar. "If you look at African economies, you'll find that they struggle with availability for third-party global currencies to settle transactions," he said. Africa's commercial banks typically rely on overseas counterparts, through so-called correspondent banking relationships, to facilitate settlements of international payments. That includes payments between African neighbours. That adds significantly to transaction costs that, along with other factors like poor transport infrastructure, have made trade in Africa 50% more expensive than the global average, according to the UN Trade and Development agency. It is also among the reasons so much of Africa's trade - 84%, according to a report by Mauritius-based MCB Group - is with external partners rather than between African nations. "The existing financial network that is largely dollar-based has essentially become less effective for Africa, and costlier," said Daniel McDowell, a professor at Syracuse University in New York specialising in international finance. HOMEGROWN SYSTEMS According to data compiled by PAPSS, under the existing system of correspondent banks, a $200 million trade between two parties in different African countries is estimated to cost 10% to 30% of the value of the deal. The shift to homegrown payments systems could cut the cost of that transaction to just 1%. Systems like PAPSS allow a business in one country, Zambia for example, to pay for goods from another like Kenya, with both buyer and seller receiving payment in their respective currencies rather than converting them into dollars to complete the transaction. Using currencies like the Nigerian naira, Ghanaian cedi or South Africa's rand for intra-Africa trade payments could save the continent $5 billion a year in hard currency, Ogbalu told Reuters. Launched in January 2022 with just 10 participating commercial banks, PAPSS is today operational in 15 countries including Zambia, Malawi, Kenya and Tunisia, and now has 150 commercial banks in its network. "We have also seen very significant growth in our transactions," Ogbalu said, without providing usage data. The International Finance Corporation, the World Bank's private sector lending arm, has, meanwhile, started issuing loans to African businesses in local currencies. It views the switch as imperative for their growth, relieving them from the currency risks of borrowing in dollars, said Ethiopis Tafara, IFC's vice-president for Africa. "If they are not generating hard currency, a hard-currency loan imposes a burden that makes it difficult for them to succeed," he said. GEOPOLITICS AND THE TRUMP FACTOR Africa's campaign to boost regional payments systems has found a platform at the Group of 20 major economies, with South Africa leading the charge as holder of the G20's rotating presidency. It held at least one session on boosting regional payments systems when South Africa hosted a meeting of G20 finance ministers and central bank governors. And South Africa wants it to follow up the talk with concrete actions. The next meeting of G20 finance officials is scheduled for mid-July. "Some of the most expensive corridors for cross-border payments are actually found on the African continent," Lesetja Kganyago, South Africa's central bank governor, told Reuters during a G20 meeting in Cape Town in February. "For us to function as a continent, it's important that we start trading and settling in our own currencies." Talk of moving away from the dollar - either for trade or as a reserve currency - has drawn aggressive reactions from President Trump, however. After BRICS - a grouping of nations including Russia, China, India and Brazil along with Africans like South Africa, Egypt and Ethiopia - weighed reducing dollar dependence and creating a common currency, Trump responded with threats of 100% tariffs. "There is no chance that BRICS will replace the U.S. Dollar in International Trade, or anywhere else, and any Country that tries should say hello to Tariffs, and goodbye to America!," he wrote on Truth Social in January. In the months since, Trump has demonstrated his willingness to use tariffs to pressure and punish allies and foes alike, a strategy that has upended global trade and geopolitics. No matter its intentions in moving to more local currency transactions, Syracuse University's McDowell said Africa will struggle to distance itself from more politically motivated de-dollarisation efforts, like those led by China and Russia. "The perception is likely to be that this is about geopolitics," he said. 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Reuters
13 hours ago
- Business
- Reuters
Under shadow of Trump warning, Africa pioneers non-dollar payments systems
NAIROBI, June 20 (Reuters) - Africa's push for local currency payments systems - once little more than an aspiration - is finally making concrete gains, bringing the promise of less costly trade to a continent long hobbled by resource-sapping dollar transactions. But efforts to move away from the dollar face strong opposition and the threat of retaliation from U.S. President Donald Trump, who is determined to preserve it as the dominant currency for global trade. The move by Africa to create payments systems that do not rely on the greenback mirrors a push by China to develop financial systems independent of Western institutions. Countries like Russia, which face economic sanctions, are also keen for an alternative to the dollar. But while that movement has gained a sense of urgency due to shifting trade patterns and geopolitical realignments following President Trump's return to the White House, African advocates for payment alternatives are making their case based on costs. "Our goal, contrary to what people might think, is not de-dollarisation," said Mike Ogbalu, chief executive of the Pan-African Payments and Settlements System, which allows parties to transact directly in local currencies, bypassing the dollar. "If you look at African economies, you'll find that they struggle with availability for third-party global currencies to settle transactions," he said. Africa's commercial banks typically rely on overseas counterparts, through so-called correspondent banking relationships, to facilitate settlements of international payments. That includes payments between African neighbours. That adds significantly to transaction costs that, along with other factors like poor transport infrastructure, have made trade in Africa 50% more expensive than the global average, according to the UN Trade and Development agency. It is also among the reasons so much of Africa's trade - 84%, according to a report by Mauritius-based MCB Group - is with external partners rather than between African nations. "The existing financial network that is largely dollar-based has essentially become less effective for Africa, and costlier," said Daniel McDowell, a professor at Syracuse University in New York specialising in international finance. According to data compiled by PAPSS, under the existing system of correspondent banks, a $200 million trade between two parties in different African countries is estimated to cost 10% to 30% of the value of the deal. The shift to homegrown payments systems could cut the cost of that transaction to just 1%. Systems like PAPSS allow a business in one country, Zambia for example, to pay for goods from another like Kenya, with both buyer and seller receiving payment in their respective currencies rather than converting them into dollars to complete the transaction. Using currencies like the Nigerian naira, Ghanaian cedi or South Africa's rand for intra-Africa trade payments could save the continent $5 billion a year in hard currency, Ogbalu told Reuters. Launched in January 2022 with just 10 participating commercial banks, PAPSS is today operational in 15 countries including Zambia, Malawi, Kenya and Tunisia, and now has 150 commercial banks in its network. "We have also seen very significant growth in our transactions," Ogbalu said, without providing usage data. The International Finance Corporation, the World Bank's private sector lending arm, has, meanwhile, started issuing loans to African businesses in local currencies. It views the switch as imperative for their growth, relieving them from the currency risks of borrowing in dollars, said Ethiopis Tafara, IFC's vice-president for Africa. "If they are not generating hard currency, a hard-currency loan imposes a burden that makes it difficult for them to succeed," he said. Africa's campaign to boost regional payments systems has found a platform at the Group of 20 major economies, with South Africa leading the charge as holder of the G20's rotating presidency. It held at least one session on boosting regional payments systems when South Africa hosted a meeting of G20 finance ministers and central bank governors. And South Africa wants it to follow up the talk with concrete actions. The next meeting of G20 finance officials is scheduled for mid-July. "Some of the most expensive corridors for cross-border payments are actually found on the African continent," Lesetja Kganyago, South Africa's central bank governor, told Reuters during a G20 meeting in Cape Town in February. "For us to function as a continent, it's important that we start trading and settling in our own currencies." Talk of moving away from the dollar - either for trade or as a reserve currency - has drawn aggressive reactions from President Trump, however. After BRICS - a grouping of nations including Russia, China, India and Brazil along with Africans like South Africa, Egypt and Ethiopia - weighed reducing dollar dependence and creating a common currency, Trump responded with threats of 100% tariffs. "There is no chance that BRICS will replace the U.S. Dollar in International Trade, or anywhere else, and any Country that tries should say hello to Tariffs, and goodbye to America!," he wrote on Truth Social in January. In the months since, Trump has demonstrated his willingness to use tariffs to pressure and punish allies and foes alike, a strategy that has upended global trade and geopolitics. No matter its intentions in moving to more local currency transactions, Syracuse University's McDowell said Africa will struggle to distance itself from more politically motivated de-dollarisation efforts, like those led by China and Russia. "The perception is likely to be that this is about geopolitics," he said.
Khaleej Times
10-06-2025
- Business
- Khaleej Times
Gold demand to hit new highs as central banks pivot away from dollar holdings
Central banks are diving headfirst into gold, driving demand to unprecedented heights as they pivot away from the US dollar in a bold de-dollarisation push. This strategic scramble for the yellow metal, fuelled by geopolitical tensions, economic uncertainty, and dwindling trust in traditional safe-haven assets, is set to propel gold demand to record levels in 2025, with prices soaring to new peaks. The current gold-buying spree is not happening in a vacuum. It coincides with a dramatic surge in gold prices, which have already risen 29 per cent year-to-date, hitting an all-time high of $3,500 per troy ounce in April. Despite the price rally, demand from central banks has remained resilient. Economists and precious metals analysts argue that the global gold rush — led by the very institutions that once anchored their wealth in dollars — reveals a profound transformation in the architecture of international finance. Metals Focus, a leading consultancy, reported that first-quarter buying in 2025 was in line with the 2022–2024 quarterly average, underscoring persistent demand even at elevated price points. The consultancy projects in its annual gold market outlook that central banks will snap up 1,000 metric tons of gold in 2025, marking the fourth consecutive year of robust official sector buying. While this forecast reflects an 8.0 per cent dip from the record 1,086 tonnes purchased in 2024, demand remains historically elevated, underscoring gold's enduring appeal as a politically neutral, non-liability-bearing reserve asset. Poland, Azerbaijan, and China lead the charge, with consistent inflows also noted into Iran, signaling sustained activity by the Central Bank of Iran. Metals Focus projects an average gold price of $3,210 per ounce in 2025 — a 35 per cent jump — fuelled by ongoing uncertainty and eroding confidence in the US dollar and Treasuries. The People's Bank of China has been a key player, boosting its gold reserves for the seventh straight month in May, adding 60,000 troy ounces to bring its total to 73.83 million fine troy ounces, according to recent data. This move reflects China's determined push to diversify holdings amid price fluctuations. Globally, sovereign players are acquiring roughly 80 metric tons of gold monthly, worth about $8.5 billion at current prices, analysts at Goldman Sachs Group Inc estimate. China's foreign-exchange reserves also edged up to $3.285 trillion in May from $3.282 trillion in April, signaling a broader strategy to bolster financial resilience. 'The drivers that have underpinned de-dollarisation in recent years remain firmly in place,' Metals Focus stated. President Trump's unpredictable policy stance, his public criticism of Federal Reserve Chair Jerome Powell, and the deteriorating US fiscal outlook have deepened doubts about the dollar and Treasuries as ultimate safe-haven assets. Elevated geopolitical tensions since the start of his administration have further dimmed the appeal of US assets, pushing central banks toward gold as a reliable hedge. This trend dovetails with broader concerns about the US dollar's waning global dominance. JPMorgan CEO Jamie Dimon and Tesla CEO Elon Musk have sounded alarms over fiscal instability and geopolitical risks, while Coinbase CEO Brian Armstrong has boldly suggested bitcoin could one day supplant the dollar as the global reserve currency. Meanwhile, alliances like Brics and the Shanghai Cooperation Organisation are accelerating de-dollarisation, increasingly conducting trade in national currencies to reduce reliance on the US dollar. Gold's allure extends beyond central banks. Investors, rattled by trade wars and uncertainty surrounding US assets, have flocked to the metal as a haven, propelling prices to near-historic highs. Though the rally cooled slightly with easing global trade tensions, bullion remains a cornerstone of stability in turbulent times. The World Gold Council notes that global gold demand, including jewelry, investment, and industrial uses, reached 4,899 tons in 2024, a record, and 2025 is poised to surpass this as central bank purchases sustain momentum. Exchange-traded funds backed by gold have also seen inflows, with holdings rising 5 per cent year-to-date to 3,200 tons, reflecting investor appetite. Looking ahead, the demand outlook remains robust. Metals Focus highlights that economic uncertainty, coupled with central banks' strategic shift, will keep gold in high demand. Emerging markets, wary of currency volatility and sanctions risks, are stockpiling gold to safeguard reserves. The International Monetary Fund reports that gold's share of global reserves climbed to 15 per cent in 2024, the highest in decades, and this trend is expected to persist. Analysts predict that if de-dollarisation accelerates, annual central bank demand could stabilise above 900 tons for the next five years, reinforcing gold's role as a cornerstone asset. They argue that central banks' relentless buying, paired with investor flight to safety, is rewriting the rules of global finance, positioning the yellow metal as the ultimate bulwark against uncertainty.
Reuters
05-06-2025
- Business
- Reuters
Central banks on track for 4th year of massive gold purchases, Metals Focus says
LONDON, June 5 (Reuters) - Central banks worldwide are on track to buy 1,000 metric tons of gold in 2025, which would be their fourth year of massive purchases as they diversify reserves from dollar-denominated assets into bullion, consultancy Metals Focus said. Gold prices are up 29% so far this year after hitting a record high of $3,500 per troy ounce in April on geopolitical tensions and economic uncertainty as U.S. President Donald Trump continues to roll out his tariff policies. The price rally has so far kept purchases by central banks, a crucial category of demand, unaffected with the first-quarter buying in line with the 2022-24 quarterly average, Metals Focus said in its annual report on Thursday. "The drivers that have underpinned de-dollarisation in recent years remain firmly in place," the consultancy said. "If anything, President Trump's unpredictable policy stance, his public criticism of (Fed chair) Jerome Powell and the deteriorating U.S. fiscal outlook have further eroded confidence in the U.S. dollar and Treasuries as ultimate safe-haven assets." "Elevated geopolitical tensions since the start of his administration have also curtailed the appeal of U.S. assets." Accounting for almost one fourth of total demand, central banks are the third largest category of gold consumption after the jewellery sector and physical investment. In 2025, purchases from central banks are expected to fall by 8% from last year's record high of 1,086 tons. In January-March, Poland, Azerbaijan, and China - consistent buyers in recent years - led the officially reported buying, Metals Focus said, adding that steady inflows into Iran also suggest further purchases by the Central Bank of Iran. Meanwhile, jewellery demand for bullion has been hit hard by the price rally. Gold jewellery fabrication fell 9% to 2,011 tons in 2024 and is expected to deliver a 16% slump this year with India and China accounting for much of this decline. The consultancy expects average gold prices to rise by 35% this year after 23% growth in 2024, and reach $3,210 per ounce "with further strength likely into 2026". Following are Metals Focus's gold supply and demand numbers, in metric tons:
Yahoo
05-06-2025
- Business
- Yahoo
Central banks on track for 4th year of massive gold purchases, Metals Focus says
By Polina Devitt LONDON (Reuters) - Central banks worldwide are on track to buy 1,000 metric tons of gold in 2025, which would be their fourth year of massive purchases as they diversify reserves from dollar-denominated assets into bullion, consultancy Metals Focus said. Gold prices are up 29% so far this year after hitting a record high of $3,500 per troy ounce in April on geopolitical tensions and economic uncertainty as U.S. President Donald Trump continues to roll out his tariff policies. The price rally has so far kept purchases by central banks, a crucial category of demand, unaffected with the first-quarter buying in line with the 2022-24 quarterly average, Metals Focus said in its annual report on Thursday. "The drivers that have underpinned de-dollarisation in recent years remain firmly in place," the consultancy said. "If anything, President Trump's unpredictable policy stance, his public criticism of (Fed chair) Jerome Powell and the deteriorating U.S. fiscal outlook have further eroded confidence in the U.S. dollar and Treasuries as ultimate safe-haven assets." "Elevated geopolitical tensions since the start of his administration have also curtailed the appeal of U.S. assets." Accounting for almost one fourth of total demand, central banks are the third largest category of gold consumption after the jewellery sector and physical investment. In 2025, purchases from central banks are expected to fall by 8% from last year's record high of 1,086 tons. In January-March, Poland, Azerbaijan, and China - consistent buyers in recent years - led the officially reported buying, Metals Focus said, adding that steady inflows into Iran also suggest further purchases by the Central Bank of Iran. Meanwhile, jewellery demand for bullion has been hit hard by the price rally. Gold jewellery fabrication fell 9% to 2,011 tons in 2024 and is expected to deliver a 16% slump this year with India and China accounting for much of this decline. The consultancy expects average gold prices to rise by 35% this year after 23% growth in 2024, and reach $3,210 per ounce "with further strength likely into 2026". Following are Metals Focus's gold supply and demand numbers, in metric tons: 2023 2024 2025F Change Change 24/23 25/24 SUPPLY Mine production 3,640 3,661 3,694 1% 1% Old scrap 1,234 1,368 1,368 11% 0% Net hedging supply 69 - 25 Total supply 4,943 5,029 5,087 2% 1% DEMAND Jewellery fabrication 2,206 2,011 1,696 -9% -16% Industrial demand 305 326 332 7% 2% Net physical investment 1,207 1,191 1,218 -1% 2% Net hedging demand - 55 - Net central bank buying 1,051 1,086 1,000 3% -8% Total demand 4,769 4,669 4,246 -2% -9% Market balance 175 359 840 106% 134% Net investment in ETPs -244 -7 500 Market balance less ETPs 419 366 340 -13% -7% Gold price ($/oz) 1,941 2,386 3,210 23% 35% Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
