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Accept Decline
1 minutes to read by  BlueBay Fixed Income team, G.Kalani May 12, 2025

Gautam Kalani, EM FX Strategist and Portfolio Manager, discusses the structural decline of the US dollar over the coming years, and makes the case that EM local currencies and rates markets should benefit from the recent turning point in the currency’s 15-year bull run.
 
Key takeaways:

  • Recent tariff noise has signalled the end of dollar dominance. Given that we’re at the tipping point of a structural shift in the outlook for the currency, markets should be prepared for a meaningful reduction in these holdings.

  • Investors will now turn their focus to alternatives for allocating capital, not just to shield portfolios from the fallout, but to deliver positive returns. EM local markets, both currencies and rates, are poised to benefit from this downward trend in the dollar. 

  • This has already been evidenced year to date, with the local sovereign index performing strongly. By offering significant diversification as well as compelling potential returns, EM local stands out as the single most attractive asset class in global fixed income markets, where investors can benefit from the dollar’s decline.

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