Citi: The narrative of de-dollarization is a "mirage" lacking economic data support.

On September 19, Citigroup analysts refuted the view that “global investors are seeking to reduce their dependence on the dollar”, saying that the “de-dollarization” narrative is a “mirage” that lacks economic data support. Although the US dollar has fallen by nearly 9% this year, a team of strategists led by Osamu Takashima pointed out in a note to clients that the US balance of payments data does not show signs of a “massive sell-off in dollar assets”; They added that there is no significant correlation between foreign portfolio investment inflows and the performance of the US dollar exchange rate in the long run. “In our view, the essence of the term 'de-dollarization' is to justify 'the weakening of the dollar due to position unwinding and hedge ratio adjustments,'” the strategists wrote. In our view, the risk of dollar depreciation should be considered separately from the issue of de-dollarization. "Citi's team of strategists remains bearish on the US dollar, expecting the euro to rise to 1.20 per euro by the end of the year from the current 1.1750, while also expecting the dollar to weaken against the yen, falling to 135 by the end of 2026, down about 9% from current levels.