Dollar Bulls Await Yellen as Citigroup Says Pessimism May Reign

Dollar bulls are looking to Janet Yellen for salvation. They may be disappointed.

The greenback has dropped against 14 of 16 major counterparts so far this month as traders pared to 30 percent the odds of a Federal Reserve interest-rate increase this year. Analysts have started to examine the prospect of the U.S. following the euro area and Japan in adopting rates below zero if the economy deteriorates. 

The Fed chair in testimony before Congress Wednesday should “deflate” some of the enthusiasm around negative rates and that may boost U.S. yields and support the dollar, according to Citigroup Inc.

“Her hope would be to unwind some of the bearishness that has engulfed asset markets, and this would be supportive for U.S. dollar, rates and equities,” Steven Englander, Citigroup’s New York-based global head of Group-of-10 currency strategy, wrote in a note. 

“However, at times market pessimism is so deep seated that good news is viewed only as an opportunity to sell at better levels.”

The dollar dropped 0.1 percent to 115 yen as of 7:52 a.m. in London after falling to 114.21 Tuesday, the weakest level since November 2014. It gained 0.1 percent to $1.1281 per euro, after reaching $1.1338 on Tuesday which was its weakest in three months. 

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, was little changed at 1,220.80 and has lost 2.5 percent since Jan. 29.