Citigroup Inc (NYSE:C). is bullish on the dollar. U.S. President Donald Trump could change that.
The administration’s preference for a weaker greenback, combined with its unpredictable policy moves, pose a key risk for foreign exchange markets, according to Calvin Tse, North American head of G-10 FX strategy at Citigroup in New York. Even though the chances are slim, investors can’t ignore the possibility that the Treasury may intervene by selling dollars, Tse said.
“We remain structurally bullish,” as strong growth and relative yields attract capital to the U.S., Tse said in an email. “The biggest risk to our view, however, is that the Treasury decides to intervene to weaken the USD. Though still a tail risk, if they were able to corral the Fed to participate, this would be a game changer for the USD outlook.”
The dollar has risen more than 1.3 percent this year amid strong U.S. economic growth and Federal Reserve interest-rate hikes. The greenback’s been whipsawed by escalating tension between the U.S. and its trading partners, punctuated by Trump’s repeated accusations that China and the European Union are manipulating their currencies.
