Dollar "dead cat bounce"? Doubleline Capital: Likely to depreciate significantly, initiating a "multi-year downturn cycle"

According to Bill Campbell, portfolio manager at DoubleLine Capital, the US dollar is expected to further significantly depreciate. If the new Federal Reserve chairman takes quick action to lower interest rates, it might become the catalyst to push the dollar down. Campbell stated in an interview, "There is still potential for more downside for the dollar." As of September 2024, DoubleLine Capital managed assets worth $95 billion. After experiencing the worst start to the year ever, the US dollar saw its first monthly increase since 2025 in July. However, Campbell continues to hold his view that the dollar has entered a multi-year downtrend as investors shy away due to the massive US fiscal deficit and shift their investments to other regions. One major disadvantage the US dollar faces is President Trump's efforts to lower borrowing costs. Trump has criticized Federal Reserve chairman Powell multiple times as part of an unprecedented public pressure campaign, raising questions about the central bank's independence. Trump has announced that he will appoint a new Fed governor in the coming days to replace Adriana Kugler. Kugler announced her resignation on Friday, providing Trump with an opportunity to appoint a governor more aligned with his preference for lowering interest rates. The nominee for the board seat could possibly succeed Powell as chairman when his term ends in May. Trump denies any intentions to dismiss Powell. Campbell believes that the weak state of the US economy could also pressure the dollar. Data released last week showed that the labor market is much worse than expected, and inflation indicators favored by the Fed also rose in June. Economic slowdown will make it harder for the government to correct the country's fiscal trajectory. Utilizing the recent stability of the dollar, Campbell has prepared for further depreciation and increased investments in non-dollar bonds in emerging and developed markets. On Tuesday, the Bloomberg Dollar Spot Index rose by 0.2%. However, the index has fallen by 0.7% since the end of last month, with a cumulative decline of over 7% this year. Campbell states that the biggest threat to his theory is if the US adopts "exceptionalist" policies again. If fiscal policy is adjusted and trade policy becomes clearer to boost the economy, it could support demand for US assets. The portfolio manager is also closely monitoring commitments from trading partners (including the EU and Japan) to invest billions in the US, which could offset other outflows. However, the specific nature and timing of these investments remain unclear. He said, "I'm taking a wait-and-see approach on this. Besides trade agreements, I believe the speed at which global savings flow back to the US will be slower than what we have seen in the past."