On Monday, Citibank released a note highlighting the potential for a stronger US dollar, citing several factors that could play a role in the currency’s performance.
According to the company, the dollar index (DXY), which measures the greenback against a basket of other major currencies, reached significant support levels in the range of 100.30-100.82.
This situation presents what Citibank considers an attractive risk/reward scenario for investors considering dollar positions.
The bank’s analysis points to weak economic data from the European Union and developments in the US political landscape, including the upcoming elections, as elements that could tilt in favor of a stronger US dollar.
In addition, historical data indicate that September is the month when the dollar usually performs well, with positive returns observed in eight of the last ten years during this period.
The Citibank report also notes that risk aversion tends to push investors towards the safe-haven characteristics of the US dollar. This is especially important when stocks and other risky assets are underperforming, which is common in the time frame under discussion.
Moreover, the relative performance between the US and other global economies, such as data momentum and two-year yield differentials between the US and the G-6, is supporting the dollar, albeit to a lesser extent.
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The approaching US election is expected to increase volatility in the markets, which Citibank believes could be supportive of the US dollar. They expect that this volatility will limit the likelihood of risk assets rising.
However, they are also aware that the dovish stance on the Fed may offset some of the upward pressure on the dollar.
This article was translated with the help of an artificial intelligence program after an editor’s review. For more details please refer to Banha Terms and Conditions
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