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US Dollar Outlook: Rough Ride Ahead

Truth Puke’s Take: Investors, brace yourselves for a potentially significant shift in the global currency market.

The US dollar is in for a rough ride as it may weaken by up to 15% against major world currencies in the next 18 months, according to Eurizon SLJ Capital‘s CEO Stephen Jen.

The easing of inflation could allow the Federal Reserve to loosen its monetary policy, pushing the greenback further down. Jen said that the Fed’s previous rate hikes and tighter credit conditions suggest inflation is trending downwards. The US Dollar Index has already slipped 2.46% over the last four weeks, and Jen predicts that it is “vulnerable to substantial (10-15%) depreciation” in the next 18 months. This coincides with Jen’s “Dollar Smile Theory,” which posits that the greenback dwindles at times of stagnation, and that “fading inflation with a soft landing should push the dollar into the deep trough of the Dollar Smile.”

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