Originator of the "Dollar Smile" theory: The US dollar will drop another 13.5% during Trump's term.
Long-term US dollar bear Stephen Jensays that despite the recent rebound, the weak dollar will continue to decline.
According to media reports on November 11, Stephen Jen, CEO of London asset management company Eurizon, said that despite the recent rebound, the dollar will fall by 13.5% during Trump’s remaining term.
The proposer of the "Dollar Smile" theory believes that accelerating overseas economic growth will further weaken the attractiveness of the dollar.
Jen believes that the Trump administration needs the dollar to fall further to lower costs for America’s revitalized manufacturing sector. Meanwhile, investor confidence in the dollar and other major reserve currencies is declining, fueling record rallies in gold and Bitcoin. Jen expects this trend to continue.
This year, the dollar has fallen by more than 8% in total, putting it on track for its worst year in eight years, mainly due to Trump's unpredictable trade policies and expectations of Federal Reserve interest rate cuts.
(The US dollar index has accumulated a decline of 8.31% in 2025)
Theoretical Framework Supports Bearish Expectations
Jen’s "Dollar Smile" theory, proposed over 20 years ago, suggests that the dollar usually strengthens when the US economy performs strongly or is in deep recession, while in periods of only slightly ahead or lagging growth, the dollar struggles.
Jen said:
This year’s dollar decline is mainly because the US is pushing capital away from dollar assets, rather than other regions attracting it. We are still observing a soft landing for the US economy, which should complement accelerating growth in the rest of the world.
He believes:
Despite the recent rebound, the next big move for the dollar will still be down.
Jen's bearish view was proven premature last year, when the US economy alone performed strongly while other countries struggled.
But he believes that despite the impact from global trade wars, the probability of global economic performance surpassing the US is now higher. He added that growth in Europe is improving.
The International Monetary Fund expects US GDP growth to slow from 2.8% last year to 2% in 2025. In contrast, Eurozone economic growth is projected at 1.2%, up from 0.9% in 2024.
In summary, he judges that the US is in the “third or fourth inning” of a “multi-year dollar adjustment,” signaling a long-term weak dollar cycle.
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