DoubleLine Capital Predicts 9% US Dollar Decline Year to Date

DoubleLine Capital, an asset manager with $92 billion in assets under management, has expressed a bearish outlook on the US dollar. Jeffrey Sherman, the deputy chief investment officer (CIO) at DoubleLine Capital, predicts that the US dollar will depreciate in the short to medium term. This prediction is primarily based on the observation that the dollar has been overvalued for several years, as indicated by measures of purchasing power parity and trade-weighted baskets.

Sherman attributes the overvaluation to capital flight, which he believes is a significant factor driving the dollar's current strength. He also notes that the Trump Administration and Treasury Secretary Scott Bessent have expressed a preference for a weaker dollar, as it could help absorb some of the policies implemented by the administration. This stance suggests that the government may be tacitly supporting a weaker dollar to stimulate exports and economic growth.

In addition to his views on the dollar, Sherman highlights the strength of gold as an investment. He points out that gold has been steadily increasing in value across all currencies and that central banks worldwide continue to show strong demand for the precious metal. This trend, he argues, further supports the case for a weaker dollar, as investors seek safe-haven assets in times of economic uncertainty.

The US Dollar Index (DXY), which tracks the value of the dollar against a basket of six major currencies, has experienced a decline in recent months. Over the past 30 days, the index has lost nearly 0.5% of its value, and it has decreased by nearly 5% over the past three months. Year to date, the DXY has fallen by almost 9%, reflecting the broader trend of dollar depreciation.

Sherman's analysis underscores the complex interplay between currency values, government policies, and global economic trends. His prediction of a weaker dollar aligns with the views of other analysts who have noted the overvaluation of the US currency. The continued strength of gold and the demand from central banks further support the notion that investors are seeking alternatives to the dollar, potentially leading to a long-term downward trend for the American currency.