The CEO of DoubleLine Capital, Jeffrey Gundlach, has recently warned that the US dollar is not likely to track much higher in the near-term due to the ever-increasing budget deficit seen in the country.
Gundlach cited the negative correlation between the US economic and trade deficits (what Gundlach called the Twin Deficits) and the US dollar as the reasoning behind his bearish outlook. The US deficit has ballooned recently due to the stimulus efforts their government implemented to combat the effects of coronavirus lockdowns.
The amount of monetary and fiscal stimulus delivered into the US economy from the Federal Reserve and Treasury Department has raised public debt by 15% in the first half of the year according to the DoubleLine CEO.
"The dollar looks terrible," Gundlach stated in a webcast presentation last Tuesday. “The biggest reason is the way in which we're gunning the twin deficits… We know with metaphysical certitude that the twin deficit is going to go way higher, I'd say to at least 12% of GDP. That would suggest the dollar going all the way back to 2011 levels."
The appeal of the USD as a currency safe-haven is currently diminishing steadily in many investors' minds. It is anyone’s guess what the alternative may be if sentiment on the USD continues to sour.