BlackRock strategist said, “The US dollar’s ‘impenetrable armour’ is thinning as the Chinese yuan and other currencies gain ground”
The US dollar is no longer the unstoppable international reserve currency, according to a leading strategist at the world’s biggest asset manager.
In a recent interview with Semafor Business, Rick Rieder, head of BlackRock’s Global Fixed Income division, which oversees over $2.4 trillion, said that alternative currencies, including crypto assets, are “chipping away” at the dominance of the dollar.
According to Rieder, who is commenting on the latest debt limit problem, the US dollar and US assets would take a severe hit in the event of a US default.
“The reaction of foreign investors and central banks to a fall in our credit rating would be significant. Second, U.S. Treasury bonds are the most popular and widely accepted form of collateral in international financial markets.
The effect on the dollar is more cryptic. Typically, when people want to invest in something of higher quality, they turn to the dollar. International investors are more likely to diversify following sanctions and the dynamics of deglobalization [post-pandemic].”
Rieder forecasts that interest rates will drop next year, but not as much as they have in the last decade. The BlackRock chief claims that many asset values have become artificial due to the near-zero interest rates of recent years and that these prices will now need to reset.
“I anticipate a decrease in interest rates next year, but they will still be above average. And markets may be really strange. People want to think that things will go back to normal, but when they don’t, they have to quickly adapt. That is exactly what is happening now. We haven’t seen this kind of rollover financing for leveraged loans, commercial real estate, or even homes in years.”
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