In his latest monthly column for Reuters, Stephen Jen, CEO of Eurizon SLJ Capital, explores the recent shift in dollar dynamics, arguing that a correction in the U.S. dollar was likely to happen with or without the introduction of new tariffs.

Stephen writes that the dollar has been structurally overvalued and supported by years of exceptional U.S. fiscal and monetary policy. With that support now unwinding, and with the global economy showing signs of relative convergence, he suggests that the path of least resistance for the dollar is now lower, especially in real effective terms.

“Even without the new U.S. tariffs, the dollar likely would have declined this year,” Jen writes. “The dollar had become severely overvalued, and its strength had overshot fundamentals by a large margin. A correction is long overdue.”

He also notes that while tariffs may affect trade prices, they do not necessarily imply a stronger dollar - a point that challenges conventional assumptions in currency markets.

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