Mainstream rhetoric "is just an illusion"! Citigroup: Depreciation does not equal de-dollarization, and U.S. assets are not being massively sold off.

Citigroup analysts have refuted the view that global investors are trying to reduce their dependence on the US dollar, calling the idea of "de-dollarization" an illusion and pointing out that this view is not supported by economic data. The US dollar has fallen by almost 9% this year, but a team of strategists led by Osamu Takashima stated in a report to clients that international balance of payments data does not confirm a widespread sale of US dollar assets. They also added that, in the long term, there is no significant correlation between foreign investment inflows and the performance of the currency. The Citigroup strategists wrote, "We believe that the idea of 'de-dollarization' is meant to justify the phenomenon of US dollar depreciation caused by closing operations and adjusting hedge ratios. We believe that the risk of US dollar depreciation should be separated from the concept of 'de-dollarization'." Many analysts have used the concept of "de-dollarization" to describe actions taken by investors to reduce their dependence on the US dollar, due to President Trump imposing high tariffs on trade partners and threatening to weaken the independence of the Federal Reserve. Despite various concerns, there is evidence to suggest that investors are still purchasing a large amount of US stocks and bonds, and using derivatives to protect these investments from further depreciation of the US dollar. The Citigroup strategists remain bearish on the US dollar, expecting the euro to US dollar exchange rate to rise from about 1.1750 to 1.20 by the end of this year. Citibank also predicts that the US dollar to Japanese yen exchange rate will weaken, with the US dollar falling to 135 yen by the end of 2026, a decrease of approximately 9%.