Zhitong Finance APP learned that Citi said that the US dollar may continue to rise before the current slowdown in global economic ends and economic growth begins to accelerate again. Until then, the dollar was the "safeest safe haven" especially given the dollar's yields higher than other currencies around the world, Citi strategists, including Jamie Fahy, wrote in the report.
"We think what the dollar peaks requires is global growth bottoming out," said the strategists. "In order to change the trend of the US dollar, the narrative needs to be changed."
ICE dollar index (DXY), which tracks the exchange rate of the US dollar against the euro, has risen nearly 18% this year, and is expected to set an annual increase since 1972. The rising USD
continues to increase economic challenges faced by governments around the world. Strategists say the market still has a long way to go before a breath of relief, especially after U.S. Treasury Secretary Janet Yellen said this week that the strengthening of the dollar is a "logical result" under the different positions of global monetary policy.
Citi says that even if Feder decides to slow down rate hike , it may not be enough to convince most investors to sell the dollar. The improvement in global growth outlook remains key, as it has been the main driver of the dollar's past reversal, especially in the past 20 years.
They wrote: "The US dollar peak may only occur when the Fed cuts interest rates and global economic growth outside the United States bottoms out."
