Bloomberg:
‘Dollar Smile’ creator says more weakness ahead for U.S. currency
Stephen Jen, Chief Executive of Eurizon SLJ Capital and originator of the "dollar smile" theory, anticipates continued weakness in the U.S. dollar. He attributes this to concerns over a slowing U.S. economy and growing optimism about growth in other regions. Jen notes that the dollar is approximately 20% overvalued and expects a multi-year adjustment rather than an abrupt decline.
Key Takeaway Points:
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Overvaluation of the Dollar: Jen estimates that the U.S. dollar is about 20% higher than its fair value, suggesting potential for a prolonged period of depreciation.
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Economic Growth Shifts: The anticipated narrowing of the growth gap between the U.S. and other economies could further pressure the dollar.
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Multi-Year Adjustment: Rather than a sudden drop, Jen foresees a gradual, multi-year decline in the dollar's value as it adjusts to these economic realities.
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