The dollar is likely to extend gains as the global economy is decoupling and the U.S. is outperforming its counterparts, said Stephen Jen, managing partner at SLJ Macro Partners LLP.
“We only see definitive signs of recovery in the U.S. and nowhere else,” Jen said at Bloomberg Link’s FX Debates in London. “In the world where growth is decoupling and the U.S. is leading the world into a recovery, the dollar will perform quite well as risk capital is attracted into the U.S. It’s very hard to short the dollar now.”
The U.S. currency is “undervalued” and the debate about monetary policy divergence between the Federal Reserve and the rest of the world will also support the greenback, he said.
“The debate in the U.S. is very different from the debate this time last year as the market questions if the Fed will maintain quantitative easing,” Jen said. “In the rest of the world, central banks are going in the opposite direction. And the dollar, after years of debasement by the Fed, is undervalued.”
A short position is bet an asset will decline.
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