Historically, people flocked to the US dollar because it was deemed a bastion of strength, a stable currency for savings and cash balances. Local currencies, especially in emerging markets, were held in contempt for a myriad of reasons. In 2025 this changed. Now, by looking at currency movements against the US dollar, we can conclude that a lot of people feel comfortable holding local, non-US dollar, currency. This is key; investors willing to hold the local versus the US dollar is a positive for non-USD local currencies and bonds. For example, in 2025, the Mexican peso appreciated 13.8% against the US dollar, the Brazilian Real 9.96%, and the Russian Ruble by 30%. In the past these have been deemed dangerous, volatile currencies. In 2025 they were stars.
When looking at these returns, the key question is "did weak US fundamentals pressure the US dollar?" Or "was it an improvement in local currency fundamentals"? In other words, was it marked improvement in local currency economies and governments that made people want to hold their currencies? Or did investors not want to hold the currency due to fear of US dollar weakness? Essentially, was it fear or greed that drove demand for non-US dollars.
The biggest move against the US dollar was the Russian Ruble, up 30% for the year. This is a country at war and under international sanctions. Foreigners did not buy the Ruble. Local investors were pretty much forced to hold the Ruble, which lowered demand for hard currency. But for investors this was not bad and does not tell the full story. In 2025 the Russian benchmark interest rate went from over 20% at the beginning of the year to 16% at the end. At the same time, inflation went from 10% at the beginning of the year to 6.6% at year end. Whether they were forced to or not, Russian local investors earned a local real rate of return (interest-inflation) of over 10%. Non-locals came in too, explaining a lot of the move.
Mexico is a similar story; the real rate of return supported demand for the Mexican peso. Average inflation in Mexico was about 4%, declining from a peak of 4.42% in May to a November level of 3.8%. Lower inflation allowed the Mexican Central Bank to cut interest rates from a high of 10% in 2025 to 7% at present. Mexican CETES had an average yield of about 8% in 2025, finishing the year at 7.25%. An average yield of 8% led to a 4% real rate of return.
The Brazilian Real, long a scrutinized currency due to economic issues, appreciated around 10% versus the US dollar in 2025. Once again, real rate of return explains the move. Average inflation in Brazil in 2025 was approximately 5%. The 90-day government bond yield, the Tesouro, was about 14% for the year. The real rate of return on Brazilian short-term government assets was 9%.
From Russia, Mexico, and Brazil we can learn that it is the inflation adjusted return, anticipated real rate of return that influences currency sentiment.
2025 proved that there are good investments outside of the US dollar, both fiat and stable. Emerging markets like Russia, Brazil, Mexico, and South Africa may not show the rate of appreciation against the US dollar that they did in 2025, but they could still outperform the dollar.
Etherfuse is positioned to help investors exploit these rising opportunities in non-US markets through tokenized debt.
This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.
