May 2, 2017 / 9:20 PM / 3 years ago

Gundlach says U.S. dollar will stay on gentle weakening pattern

Jeffrey Gundlach, Chief Executive Officer, DoubleLine Capital LP., speaks at the Sohn Investment Conference in New York City, U.S. May 4, 2016. REUTERS/Brendan McDermid

NEW YORK (Reuters) - The U.S. dollar has been and will likely continue to be on a gentle weakening pattern, Jeffrey Gundlach, chief executive at DoubleLine Capital, said on an investor webcast late on Tuesday.

Gundlach, who oversees more than $100 billion at Los Angeles-based DoubleLine, said the dollar “has not gone up in the past 18 months.” Gundlach has said repeatedly the strength in the U.S. dollar after Donald Trump’s presidential victory would reverse itself.

Gundlach said about the soft dollar in a follow-up interview with Reuters, “The trend is your friend. The dollar went up 30-plus percent from lows in 2011. That’s a big vote for a currency. Plus, President Trump does not want a stronger dollar.”

Last month, Goldman Sachs abandoned the two strong dollar plays in its 2017 trading recommendations, pointing to the Trump administration’s concerns over the strength of the currency, along with improvement in growth in rival economies.

In a note to clients, Goldman analysts said “a number of fundamentals have changed on the margin, such that the long-Dollar story no longer warrants a place among our ‘Top Trades’.”

As for interest rates, Gundlach said he expected the yield on the 10-year Treasury to move higher. “I would prefer not to take a lot of interest rates risk now,” Gundlach said. He also said he is “not a big fan of long duration” securities.

Gundlach said he does not see stocks under severe selling pressure with the 10-year yield around 2.25 percent. But if rates rise significantly, that will likely touch off a selloff in stocks during the summer, Gundlach said.

“I think it’s wrong to characterize the environment as a ‘flight to safety’,” as the Treasury rally has been weak, Gundlach said. He would characterize the environment as a low volatility one, he added.

On gold, Gundlach said he sees “another leg up” in prices and that “it is not a time to give up on gold.”

Reporting By Jennifer Ablan; Editing by David Gregorio and Chris Reese

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