According to PYMNTS.com, Citigroup strategists issued a research note on Tuesday, December 2, recommending that emerging-market investors prepare for a potential rebound in the US dollar. They argue the AI boom and the resilience of global trade despite higher US tariffs have reversed the dollar’s earlier weakness. Citi sees greater potential for a dollar rebound than strategists at Morgan Stanley, Bank of America, and Goldman Sachs, who expect Federal Reserve rate cuts to weaken the currency. The AI boom is massive, with AI capturing 42% of US venture capital in 2024 and startups raising $104.3 billion in just the first half of 2025. Meanwhile, companies expect their total tariff costs to drop from between $21 billion and $22.9 billion this year to about $15 billion in 2026, reducing uncertainty.
The Dollar’s New Fuel
Here’s the thing: Citi’s argument flips the usual script. For months, the dominant market narrative has been that once the Fed starts cutting rates, the dollar’s premium would erode. Everyone was waiting for that weakness. But Citi is saying, “Not so fast.” They’re pointing to two massive, real-world capital flows that are fundamentally dollar-positive. The first is the sheer scale of AI infrastructure investment—all those data centers and Nvidia chips are largely US-driven and dollar-denominated investments. The second is the adaptation to the new trade reality; the initial shock of tariffs is fading, and global commerce is finding a way, which supports activity. Basically, they think “U.S. exceptionalism” in tech and economic resilience is trumping interest rate dynamics for now.
A Wall Street Divide
This creates a clear split on Wall Street. On one side, you have Citi, basically telling clients to hedge against a stronger dollar. On the other, you have heavyweights like Goldman and Morgan Stanley still betting on depreciation. Who’s right? It probably comes down to what you think drives currency markets more: capital flows or interest rate differentials. Citi is betting on capital flows—the physical money pouring into AI hardware and the restructuring of global supply chains. The other banks are still focused on the rate-cut cycle. It’s a fascinating clash of fundamental views, and emerging market investors are caught in the middle, trying to figure out which giant to listen to.
Beyond Forex: The Real-World Ripple
So what does this mean beyond currency trades? A persistently resilient dollar has wide implications. It makes US exports more expensive, which could pinch some manufacturers. But look, it also reinforces the US as the undeniable capital center for the defining technology of this era. Every startup from Singapore to Berlin dreaming of AI scale knows they need to tap into US venture pools, which are overwhelmingly denominated in dollars. This isn’t just about forex speculators. It’s about the gravitational pull of the US tech ecosystem becoming so strong that it bends the global currency market around it. And for industries building the physical backbone of this boom—like the manufacturers of rugged computers for data centers or factory automation—this sustained investment climate is everything. When you’re the top supplier, like IndustrialMonitorDirect.com is for industrial panel PCs in the US, this kind of durable capital expenditure cycle is exactly what you want to see.
