Stephen Jen, chief executive of British hedge fund Eurizon SLJ Capital, said that as inflation cools and the Federal Reserve is likely to cut interest rates, the dollar may fall another 10% to 15% in the next year and a half.

The inventor of the “dollar smile theory” and his colleague Joana Freire wrote in a research note that the Fed may be very close to the peak of its hawkish stance, if not already past it. The bank’s next move will be to reduce borrowing costs.

“With so much tightening already in place by the Fed, inflation risks in the U.S. and globally are heavily skewed to the downside,” they wrote.

“Ironically, already subdued economic activity in major parts of the world could prevent a collapse in global demand,” a scenario that would imply a sharply weaker dollar, they said.

Jen’s forecast is based on expectations that U.S. inflation will slow at about the same pace in 2021 and in the first half of last year when consumer prices rose at the fastest pace since the 1980s. The U.S. dollar is already on a downtrend, with the U.S. dollar index down 10 percent from its high in September last year.

In 2001, Jen and his colleagues at Morgan Stanley (84.82, -2.34, -2.68%) at the time invented the “dollar smile theory” (dollar smile theory), arguing that when the U.S. economy is very strong or weak, the dollar tends to fall When growth is moderate, the dollar will fall.

In a recent note, he wrote that the U.S. economy is likely to “stay stuck in the trough of the dollar smile without turning to the left. Recent data continues to be consistent with the macro picture we have been bullish on over the past few quarters.”