Citi Downgrades Dollar Forecast: Fed's Dovish Shift and Treasury Buybacks Pressure Dollar
08/20 20:35
On August 21, Citi Group's forex strategists turned bearish on the short-term outlook for the dollar, citing that the market is preparing for a more dovish Federal Reserve, the upcoming midterm elections, and the U.S. Treasury's further expansion of Treasury buybacks. Led by strategist Daniel Toh, the Citi team revised its dollar index forecast for the next three months from 102.12 to 98.34. Citi previously noted that U.S. Treasury Secretary Yellen's recent move to lower long-term borrowing costs by expanding buybacks of 10 to 30-year U.S. Treasuries could come at the dollar's expense. After the dollar index fell to its lowest level since May on Wednesday, it remained roughly flat around 98.9 on Thursday. The Citi team stated that their view on the dollar has been 'relatively neutral' in recent months, but they have warned that risks to the dollar may increase in the coming months.
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