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Dollar Has Peaked

Key takeaways

  • Citi analysts expect the EUR to appreciate over the medium term given a strengthening economy, persistent equity inflows and a high current account surplus.
  • The CAD appears well placed to outperform the AUD and NZD as Citi sees potential for the Bank of Canada to raise rates further in the first half of 2018.
  • Citi analysts expect the CNY to remain broadly stable. This is likely to help anchor the emerging Asian currencies with the MYR likely to outperform.


The US dollar (USD) appears to have peaked. Real growth rates in Europe, Japan and the Emerging Markets are picking up and converging with the US’, reducing the cyclical support enjoyed by the US dollar. At the same time, the dollar has rallied for 6 years, the typical length for dollar rallies historically. These tend to be followed by dollar bear markets which last for 10 years. The dollar is also looking less attractive compared to the EUR, as the European Central Bank (ECB) is expected to adopt a less accommodative policy stance in 2018 and beyond.

While US fiscal policy stimulus via tax reform/cuts may support the USD, the net stimulus is likely to be relatively small.








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