On Aug. 21, Citi’s currency strategists turned more bearish on the U.S. dollar and cut their three-month DXY forecast from 102.12 to 98.34. The team, led by Daniel Tobon, said markets are pricing in a softer Fed hawkish stance, the U.S. midterm elections and Treasury debt buybacks. Citi had already warned that expanding buybacks of 10- to 30-year Treasurys could come at the cost of a weaker dollar. The dollar index briefly hit its lowest level since May the previous day before holding around 98.9.
Citi lowers its three-month dollar forecast
On Aug. 21, Citi’s currency strategists turned bearish on the U.S. dollar. In a research note released on Thursday, the team led by Daniel Tobon cut its three-month U.S. dollar index forecast from 102.12 to 98.34.
The bank said the move comes as markets begin to price in a weaker hawkish stance from the Federal Reserve, the U.S. midterm elections and an expansion in Treasury debt buybacks.
The dollar index briefly fell to its lowest level since May the previous day, then was mostly unchanged at 98.9.
Citi says its dollar view has turned more neutral
Tobon and his team said their stance on the dollar has been "more neutral" in recent months, and warned that risks could rise over the next few months.
Citi had previously warned that the latest move by U.S. Treasury Secretary Scott Bessent to lower long-term borrowing costs — expanding buybacks of 10- to 30-year Treasurys — could come at the expense of a weaker dollar.
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