As discussions at Davos turn to dedollarisation, Steve Ryder, Senior Portfolio Manager at Aviva Investors, says incremental shifts away from the dollar could reshape global capital flows and create opportunities across sovereign bond markets, particularly in EM local rates.
“As leaders convene in Davos, the conversation on dedollarisation is gaining renewed urgency against a backdrop of US–EU tensions and shifting geopolitical dynamics. For global sovereign investors, this is a currency debate, but also a structural pivot towards a multipolar financial system. Diversification beyond the dollar offers resilience, particularly as emerging markets stand to benefit from rebalanced capital flows and greater autonomy in policy-making.
“The global macroeconomic narrative underscores the fragility of traditional anchors, reinforcing the case for a broader lens in reserve management and strategic asset allocation. While the dollar’s dominance will not vanish overnight, incremental shifts towards euro, renminbi and other credible alternatives could reshape liquidity patterns and risk premia. For investors, the opportunity lies in anticipating these flows—positioning portfolios to capture the upside of a more distributed global order.
“We continue to be positioned for greater dispersion across global sovereign bond markets this year, driven by diverging interest-rate expectations, varying fiscal dynamics, and evolving patterns of cross‑border bond flows. In our view, this environment remains supportive of an allocation to EM local rates. Within developed markets, we maintain a preference for curve steepening strategies and favour overweight positions in select key markets relative to the United States.”
