US dollar may drop 20% in 2021 – Citigroup

Citigroup analysts foresee potential widespread availability of coronavirus vaccines to help revive global trade and economic growth and fuel as much as a 20% decline in the US dollar in 2021, according to Bloomberg. 

Key quotes/points

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.

In addition to the impact from vaccine breakthroughs, the dollar will suffer as the Fed will remain dovish as the global economy normalizes, the rest of the world is likely to grow at a faster pace, and as investors rotate out of US assets and into international assets.

Should the US yield curve 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 spiraling lower sooner.

The dollar index, which gauges the greenback's value against majors, is currently seen at 92.50, down 4.18% on a year-to-date basis.