US Dollar may drop by 20% in 2021: Citigroup

The US election and the announcement of COVID-19 vaccine likely Pfizer and Moderna, to be more than 90% and 94.5% effective respectively, can have a significant effect on Dollar. According to Citigroup, an American Multinational Investment Banking firm, the dollar might drop to 20% the next year due to COVID-19 vaccine distribution.

For months, the strategists have been positing themselves for the US election and the Coronavirus breakthrough, so that the Federal Reserve policy will have less impact on the currency.


The Bloomberg dollar which was already under too much pressure after fallen 11% from its march peek, has an additional pressure after Moderna announced the vaccine is 94.5% effective in clinical trials, weighing on demand for havens like the greenback, the yen, and Treasuries.

The strategists said, “The US yield curve should steepen as inflation expectations rise, this will incentivize investors to hedge currency exposure. Given this setup, there is the potential for the dollar’s losses to be front-loaded, with the currency spiralling lower sooner. There is plenty of reason to be optimistic about vaccine developments. The distribution will catalyze the next leg lower in the structural USD downtrend we expect.”

The consensus of forecasters surveyed, that Intercontinental Exchange Inc.’s widely watched dollar index, the DXY, will weaken by about 3% through the end of next year. Its biggest annual decline came in 1985 when it sank 18.5%