Citi analysts expect dollar to peak only when global economy hits bottom

The dollar continues to rally until the global economy recovers and accelerates, according to Citigroup Global Markets Inc.

So far, the dollar is likely to be considered the best "safe haven currency" as it assumes a yield premium compared to other national rivals. This was reported by Citigroup strategists, including Jamie Fahy. 

"In our view, for the dollar to come close to the top, global growth rates need to reach their lowest level," the strategists noted. "Thus, there must be a global shift in order to change the trajectory of the currency."

Experts say economic relief isn’t expected soon. This is particularly influenced by the speech of U.S. Treasury Secretary Janet Yellen last week. She mentioned the dollar strengthening to be a "logical result" as the world governments have different positions on monetary policy. 

Monetary easing by the Federal Reserve (Fed), i.e. lowering the pace of interest-rate hikes, won’t be enough to convince investors to sell the dollar. Accelerating global growth remains a key agenda as it has been a major factor in reversing the dollar's trend for the past two decades. 

"The U.S. dollar is most likely to peak when the Fed cuts interest rates. Meanwhile, there should be a decline in global growth outside the U.S.," strategists said.