Hedge fund godfather Jones warns: Trump's "super dovish" nomination for the Federal Reserve may cause the US dollar to fall by 10% in the next year.

Macro hedge fund giant Tudor Investment Corp. founder Paul Tudor Jones recently warned that as the Federal Reserve embarks on a significant interest rate cut cycle, the US dollar may face a depreciation pressure of up to 10% in the next year. The legendary investor managing $16 billion in assets bluntly stated, "We are entering a period of significant downward adjustment in short-term interest rates, which will constitute a substantial bearish impact on the dollar." Jones' prediction is based on his assessment of the Fed's policy path. He pointed out that when Federal Reserve Chairman Powell's term expires next year, President Trump may appoint a "super-dovish" successor to align with his economic growth policies. This policy shift, combined with the current Fed rate cut cycle, is steepening the yield curvecurrently, the yield spread between two-year and ten-year US Treasury bonds has widened to the highest level since April 2022, a formation that typically signals pressure for currency depreciation. Market trends seem to be confirming this assessment. The US dollar spot index has dropped by nearly 8% since the beginning of the year, marking the worst annual start since the index was established in 2005. It is worth noting that this weakening of the US dollar coincides with a period of volatility in Trump's trade policies, signaling a structural shift in market risk appetite for US dollar assets. Option trading data further reveals the flow of funds. Although bearish sentiment towards the US dollar has eased from the extreme levels during the pandemic panic last month, overall positioning still indicates that investors expect the US dollar to continue to weaken against a basket of major currencies in the next month.