"Dollar smile" theorist sees yuan rallying to high 6s vs US dollar

Stephen Jen, chief executive of Eurizon SLJ Capital and renowned for his "dollar smile" theory, predicts the Chinese yuan could appreciate significantly against the US dollar, potentially reaching the high 6-level, Bloomberg reported.

Jen argues that Beijing faces mounting pressure to allow its currency to strengthen. 

He suggests that a fairer valuation for the yuan, around the high 6s compared to its current level above 7, would not only be more justified but could also improve China's standing with its trading partners by dispelling perceptions of "opportunistic devaluation."

A long-time dollar bear, Jen believes the greenback is overvalued and that Chinese financial assets remain undervalued and underowned. 

He posits that a stronger yuan could be a strategic tool to attract foreign capital back into China's financial markets.

The widely recognized “dollar smile” theory, proposed by him over two decades ago, explains how the greenback appreciates during global recessions which he described as a “smile.”