The US Dollar is in a precarious position as the BRICS are trying to dethrone it from its status as the world’s reserve currency. The de-dollarization agenda is gaining momentum as the BRICS convince developing countries to sever ties with the US Dollar. Following the BRICS de-dollarization efforts, Citi Bank has predicted the future of the US Dollar. Citi has given an insight into how the major currency will fare in the coming months.
BRICS: US Dollar May Fall, Citibank Predicts
Citibank predicts that the US dollar may weaken due to the slowdown in the global economy and continue to be in a bearish market for the next two months. The DXY index, which tracks the movement of the US dollar, has the US dollar at 101.40. This is a sharp drop as the US dollar was at 106.20 in June this year. This drop is coming at a time when the BRICS countries are advancing and pushing the US dollar to the bottom of the charts. Citibank predicts that the BRICS currencies may slightly outperform the US dollar for the next two months.
Read here to know which sectors of the US would be affected if the BRICS abandoned the dollar in trade. Also, analysts at Citi Bank suggest that high foreign exchange currencies such as the euro and the pound could fall in tandem with the US dollar. The bank remains cautious on the euro, writing that a currency-economic crisis could slow its growth. This could bring the US dollar and the euro into the spotlight, which could propel the BRICS currencies forward.
In conclusion, Citibank’s outlook for the US dollar is bearish in the short term but bullish in the long term amid de-dollarization in BRICS countries. “But given that our economists expect a U.S. recession and an eventual change in ECB policy, we ultimately think the dollar could see some strengthening in the second half of the year.” They wrote.
