‘Dollar Smile’ Creator Sees 13.5% Drop in Currency Under Trump

Stephen Jen, CEO of Eurizon and creator of the 'dollar smile' theory, forecasts a further 13.5% decline in the US dollar during the remainder of Donald Trump's presidency. This prediction comes after an approximate 7% drop in 2025, positioning the dollar for its worst year in eight, as Jen anticipates accelerating global growth will diminish the greenback's appeal.

Analysis

Stephen Jen, CEO of Eurizon and creator of the influential "dollar smile" theory, forecasts a significant depreciation of the US Dollar. He projects an additional 13.5% decline in a gauge of the currency during the remainder of Donald Trump's presidency. This anticipated drop follows an approximate 7% decline in 2025, which has already positioned the dollar for its weakest annual performance in eight years.

Jen's bearish outlook is primarily predicated on the expectation of accelerating global growth, which he believes will diminish the greenback's relative appeal as a safe haven and growth proxy. This perspective aligns with his long-standing bearish stance on the dollar, indicating a consistent view on fundamental currency drivers. The forecast specifically links the decline to a potential Trump presidency, introducing a political dimension to currency valuation.

The prediction from a recognized expert like Jen carries significant weight, suggesting considerable volatility and risk for dollar-denominated assets. A potential 13.5% further decline, compounding recent losses, implies a notable shift in global capital flows away from the US. This outlook signals a challenging environment for investors with substantial dollar exposure.

Key Decisions for Investors

• Investors should assess their portfolio's dollar exposure and consider potential hedging strategies against significant depreciation, given the forecast for a further 13.5% decline.
• Monitor global growth indicators and US political developments, particularly the presidential election outcome, as these are key drivers underpinning Jen's bearish dollar forecast.
• Evaluate the relative attractiveness of non-dollar denominated assets and currencies, especially those in economies expected to experience accelerated growth, as capital may shift away from the greenback.