Why JPMorgan Asset Management Is Betting on a Weaker Dollar

JPMorgan Asset Management has staked out a long-term bearish position on the U.S. dollar, grounded in a sober assessment of America's fiscal trajectory. The firm doesn't see a crisis-driven collapse but rather a slow, structural depreciation fueled by unsustainable debt levels, chronic deficits, and the gradual unwinding of a dollar that remains roughly 10% overvalued versus fair value .

Patrick Thomson, CEO EMEA at JPMorgan Asset Management, crystallized the core concern at an industry conference in late May 2026: "There is an argument to say over the long term the U.S. dollar will weaken. The dynamic of the fiscal position in the U.S. is creating that level of debt that is just unsustainable" .

That single statement encapsulates a view that now runs across the firm's research, asset management, and private bank divisions.

The Basis for the Bearish Call: Debt, Deficits, and a Fading Edge

The bearish stance is not a short-term trade but a structural thesis anchored in three overlapping dynamics.

Unsustainable fiscal math. The U.S. national debt now exceeds $37.8 trillion, and annual interest payments have crossed $1.2 trillion . The debt-to-GDP ratio already sits at 99.9% and, on current policy, is projected to climb above 120% over the coming decade . The federal deficit for fiscal 2025 came in at $1.809 trillion (6.0% of GDP), barely changed from the prior year's $1.817 trillion—and that figure would have been $2.043 trillion absent a one-time student loan accounting adjustment . Congress, meanwhile, has contemplated tax legislation that could add nearly $6 trillion to the deficit over ten years . J.P. Morgan's chief strategist David Kelly captured the mood by warning that America is "going broke slowly" .

Fading U.S. exceptionalism. The narrative of overwhelming American economic outperformance has eroded. J.P. Morgan Research has explicitly cited "fading U.S. exceptionalism" as a driver, noting that emerging market currencies are positioned to outperform . The dollar's 10.7% decline in the DXY index during the first half of 2025 was its worst opening-six-months performance in over 50 years . Notably, that slide occurred even as the Federal Reserve held rates steady while other developed-market central banks cut—evidence that slower U.S. growth, rising deficits, and shifting global capital flows, rather than interest rate differentials, are now the dominant forces .

A formal, quantified bearish position. J.P. Morgan's currency team, led by Meera Chandan and Arindam Sandilya, first adopted a bearish dollar stance in March 2025 and has maintained it since . For 2026, Chandan describes the view as "net bearish, albeit smaller in magnitude and less uniform in breadth than in 2025" . The firm's 2026 Long-Term Capital Market Assumptions (LTCMAs) put fair value for the dollar against the euro at 1.26 and against the pound at 1.48 by 2038, implying a steady depreciation of about 0.6% per year .

Chronic Deficits and the "Going Broke Slowly" Framework

The fiscal picture underpinning the bearish outlook is stark but orderly. On existing policy, the federal deficit is expected to stay in the range of 7–8% of GDP for the next ten years . Without significant legislative change, debt held by the public relative to GDP is projected to breach 120% .

JPMorgan Chase CEO Jamie Dimon has repeatedly voiced alarm that elevates the issue beyond an academic forecast. In mid-2025 he warned that "the bond market is going to have a tough time. I don't know if it's six months or six years," cautioning that once investors fully absorb the implications of rising debt, interest rates could spike and markets could be disrupted .

Yet the bank's base case is not a crisis. JPMorgan's private bank acknowledges that the dollar's reserve currency status remains intact, sustained by deep trust and a genuine absence of viable alternatives . The EMEA CEO underscored the same point: "The hegemony of the U.S. Treasury is still alive and well" . The risk, in the firm's framework, is gradual erosion rather than sudden regime change.

Federal Reserve Policy and Shifting Yield Dynamics

The Fed's posture is a critical piece of the puzzle. J.P. Morgan's 2026 market outlook highlights a Fed that "continues to fret about labor market softness" as a supporting pillar of dollar weakness . As the central bank eases—or at least signals a willingness to ease—the interest rate differentials that long supported the dollar against other major currencies narrow. J.P. Morgan expects converging short-term yields across currency pairs in the years ahead, and its asset management arm argues this makes strategic currency hedging increasingly attractive for long-term investors .

Trade Tensions and Geopolitical Shifts

The bearish view also reflects a changing global landscape. Broad-based U.S. tariffs have the potential to amplify the dollar's downtrend by reducing foreign demand for American assets . In contrast, European fiscal expansion—particularly Germany's move toward greater fiscal support—creates an alternative growth story that underpins a bullish euro outlook relative to the dollar . Trade frictions, in J.P. Morgan's analysis, directly undermine the foreign investor appetite for U.S. bonds that has historically been a core source of dollar demand .

A Reset, Not a Breakdown

What distinguishes JPMorgan Asset Management's view from more alarmist takes is the framing. The firm explicitly says it does not see this as a breakdown or collapse of the dollar . The private bank's mid-2025 outlook described the unwinding of the dollar's long-standing overvaluation as potentially delivering a 10–20% decline against major peers over the medium term, but characterized it as a "reset" .

The investment implication is not panic but deliberate diversification. The firm suggests that while the United States remains a valuable core holding, an environment of gradual dollar depreciation makes intentional diversification across regions and currencies essential .

For global investors tracking the world's primary reserve currency, the message from one of the largest asset managers on the planet is clear: the dollar's trajectory for the next decade points lower—slowly, and from a position of enduring strength, but lower nonetheless.