Citigroup predicted the dollar to fall by 20% next year

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Citigroup predicted the dollar to fall by 20% next year

19.11.2020 News

If coronavirus vaccines become widely available and help restore international trade and economic growth, the dollar is likely to fall by 20% in 2021. Bloomberg reports that this forecast was made by Citigroup Bank. If the forecast comes true, it will be a record drop since 1985, when the DXY index fell by 18.5% over the year tracking the ratio of the US dollar to a basket of six major currencies.

In addition to breakthroughs in the field of vaccines from COVID-19, the dollar will also be hit by the cautious policy of the US Federal Reserve, the bank said. He points out that as the situation in the world economy normalizes, investors will move from US assets to other markets.

The Bloomberg Dollar Spot Index, which reflects the dynamics of the dollar against ten other major “in terms of trade and liquidity” currencies, fell by about 11% since the peak of the crisis in March. On Monday, the index came under additional pressure after the publication of news about the almost 95 percent effectiveness of the vaccine from Moderna.

Citigroup strategists state that the spread of the vaccine will cause the dollar to follow the same path of the early and mid-2000s. The US currency then fell for several years, recalls Bloomberg. Citigroup emphasizes that China’s accession to the World Trade Organization was the catalyst for the fall in 2001. It “contributed to the wave of globalization, leading to an increase in international trade and leaving behind the closed US economy.”

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