The dollar losing its reserve currency status is dubious, but 'we keep chipping away at its impenetrable armor' says BlackRock bond chief

• A US debt default could have an impact on the US dollar, BlackRock's bond chief told Semafor.
• International investors are starting to diversify away from the USD with the euros and CNY, he said.
• But it's dubious that the USD will lose its reserve currency status, even as other assets chip away at its dominance.

A top executive at the world's biggest asset manager has warned that a US debt default could also nick the dollar's clout as the world's reserve currency.

"Normally the flight to quality in the world is into dollars. But after sanctions and the dynamic around deglobalization [post-pandemic], international investors are inclined to diversify," Rick Rieder, BlackRock's chief investment officer of global fixed income, told Semafor on Tuesday.

"When people ask whether the dollar is going to lose its reserve currency status, I think that's dubious," Rieder told the outlet.

Even so, "we keep chipping away at the impenetrable armor of the dollar," he added.

Rieder was speaking to Semafor about the implications of a US debt default — a risk that hangs over the markets amid intense negotiations between the Democrats and the Republicans over raising the debt ceiling.

One of the implications Rieder flagged was a ratings downgrade on US Treasury bonds.

"A ratings downgrade would be a big deal because of how international investors and other central banks would view our debt," Rieder, who manages $2.4 trillion in fixed income assets at BlackRock, the world's largest asset manager with $9.1 trillion under management as of March 31.

It could also impact the Treasurys bonds market, he added.

At the same time, there's an ongoing global debate over de-dollarization, as countries line up backup currencies for trade amid concerns that Washington's weaponizing the greenback following the Ukraine war.

Rieder said that alternative assets eating away at the dollar's lead, including assets like the Chinese yuan, the euro, crypto, and gold.

BlackRock did not immediately respond to Insider's request for comment sent outside regular business hours.