Bloomberg News: Citigroup Says Dollar May Drop by 20% Next Year on Vaccine Push

Artticle by Susanne Barton in Bloomberg News

The dollar is likely to begin a drop of as much as 20% in 2021 should Covid-19 vaccines become widely distributed and help to revive global trade and economic growth, according to Citigroup Inc.

“Vaccine distribution we believe will check off all of our bear market signposts, allowing the dollar to follow a similar path to that it experienced from the early to mid-2000s” when the currency started a multi-year downturn, Citigroup strategists including Calvin Tse wrote in a report Monday.

The Bloomberg dollar index, which has fallen more than 11% from its March peak, came under additional pressure Monday following news that Moderna Inc.’s Covid-19 vaccine was effective in a clinical trial, weighing on demand for havens like the greenback, the yen and Treasuries.

Strategists have been positing for months that the U.S. election, vaccine breakthroughs and Federal Reserve policy could deal a serious blow to the currency. The election was not ultimately the catalyst for a significant plunge, but Citigroup says the broad macroeconomic backdrop will be a bigger driver of the dollar going forward.

Citigroup expects that in addition to the impact from vaccine breakthroughs, the dollar will suffer as the Fed will remain dovish when the global economy ....

To read this article in Bloomberg News in full and view the relating chart, click here.