The 27-year-old Dundalk winger is out of contract at the end of the current campaign and has been strongly linked with a return to his hometown club.
Speculation continues to mount and it's understood the Galliagh man will exit Oriel Park where he's been instrumental in the Co. Louth club's success since joining from Celtic in February 2017.
City boss Higgins has dismissed reports the player has agreed a pre-contract agreement to return to Foyleside but admitted the club would be interested in top players when they become available.
"Michael Duffy is a phenomenal player," said Higgins. "I've worked with him, played with him. He's a brilliant player. But it's a natural link because he's from here. So I'm not surprised that we're being linked with him.
"I'm reading and hearing that it's a done deal but as of now, it's not a done deal," he insisted.
"We are going to be interested in really good players when they become available but at this stage he's a Dundalk player so it's far from a done deal," he repeated.
Duffy made 78 appearances for Derry City prior to making his move to Celtic in 2014, scoring 20 goals.
Higgins has already secured the signature of Dundalk star Patrick McEleney for the 2022 campaign and to land Duffy would be a real statement of the club's intent.