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Main » 2019 » March » 29 » Why the dollar will fall and how to make money?
Why the dollar will fall and how to make money?


Due to the fact that the S & P 500 headed for the best quarter since 2009, as investor sentiment improved, now may be a good time to make a profit not only from the shares. 

That is a good investment: a dollar. US dollar, dollar prepared according to the index to fall. Therefore, the purchase of assets that benefit when the dollar falls - gold, oil, energy and commodities - it makes sense. Similarly, short-selling of the dollar (betting on a fall) may be profitable.





On investment experts, including Jeffrey Gundlach of DoubleLine Capital had forecast a weakening of the dollar since the beginning of September last year. Since then, the dollar traded most of the time at the higher levels. But now it seems that Gundlach was right. Your attention six reasons for the decline of the dollar, and 12 ways to win like this. 


1. Trump wants to weaken the dollar

One of the major achievements of President Donald Trump was to maintain economic growth, initiated by Obama. Positive trends in employment - the main indicator of economic power - established the Obama policy, persisted at Trampe. The average monthly increase in jobs is about the same for both presidents.

Maintaining growth initiated by Obama, Trump has allowed himself to ascribe near-record low unemployment. Since this is one of the main topics of communication with voters Trump, he may need to maintain this trend, to win in 2020. A weak dollar will help in this. This increases the demand for American goods abroad, because the lower dollar makes American goods cheaper. This may contribute to increased productivity in key states such as Ohio and Wisconsin. 

It is not surprising that Trump called for the weakening of the dollar. He said he opposes "the dollar, which is so strong that it makes it impossible to do business with other countries," in his speech on March 2 a conference of conservative political forces (CPAC).

2. The long dollar positions - tense trade

As president, Trump has enough powers to influence policy in such a way as to get what he wants - a weaker dollar. Therefore, a bit surprising to see increasing bullish bet on the dollar. Speculators have recently increased their net long positions in the US dollar to nearly $ 30 billion, the highest level since the end of December, according to the Commodity Futures Trading Commission USA. 

3. Investors believe that the US inflation rises

Many analysts believe that the only differences in the interest rates countries account for currency movement, as the money supposedly "splash" around the world in pursuit of the best interest rates. But this is not the case. Money pursue real interest rates, so you have to take into account inflation. When it is expected that inflation in the country will increase, far-sighted investors sell the currency, because inflation will erode its value. 

It seems that this dynamic will soon affect the dollar. Since January, inflation expectations embodied in Treasury Inflation-Protected Securities (TIPS) , rose, indicating Jim Paulsen, chief investment strategist at Leuthold Group. This trend could hurt the dollar sooner or later. 

4. Concerns about geopolitics decreases

When the world's problems, investors are moving to the dollar for safety. Over the past few months, investors had two big geopolitical issues: trade war the United States and China, Brexit. According to Paulsen, these uncertainties have increased the rate on the dollar. 

Earlier it was reported that US auto sales fell in March: JD Power, LMC Automotive. 

Brexit settlement would boost the British pound and the euro against the dollar. The resolution of trade disputes between the US and China will send dollars outside the United States, since that resolution dispel fears that a trade war will reduce global growth. This will also cause the dollar's decline.

Meanwhile, China and Europe strengthen economic incentives to maintain growth. If it works, it will attract overseas investment from the United States. It also weaken the dollar. 

5. The decline of the dollar creates a feedback loop

Since commodities tend to rise in price when the dollar falls, weaker dollar helps the emerging markets, whose growth is dependent on the movement of goods. This economic strength of the developing countries would weaken the dollar even more, because it will contribute to the outflow of investment from the United States. 

6. Concerns about the US debt could increase

In good economic times, policymakers should take advantage of the higher tax receipts, to get rid of the deficit and debt levels. Unfortunately, those who have chosen the Americans do not understand this. Ever since Trump took office, the annual deficit and debt levels began to rise. 

This is one of the reasons that Ray Dalio of Bridgewater Associates makes us bearish forecasts in relation to the dollar. He fears that the Federal Reserve may have to at some point to print money to finance the US budget, because the sale of treasury bonds will not cope with the task without a substantially higher yield, which hurts growth. 

How to play on the falling dollar?

These exchange traded funds (ETFs) are growing, when the dollar falls: Invesco DB US Dollar Index Bearish Fund , ProFunds Falling US Dollar Fund and Rydex Weakening Dollar 2x Strategy Fund. And these currency funds benefit: Invesco CurrencyShares Euro Currency Trust and WisdomTree Dreyfus Emerging Currency Fund. 

Precious metals often rise when the dollar weakens, so, these ETFs can win: VanEck Vectors Gold Mining ETF, SPDR Gold Shares and iShares Silver Trust. 

Oil and energy resources often benefit when the dollar falls, so you should pay attention to the following ETF: SPDR S & P Oil & Gas Exploration & Production and Energy Select Sector SPDR Fund.

Commodities and emerging markets may rise, so the benefits can get the following ETF: Invesco DB Commodity Index Tracking Fund, Vanguard FTSE Emerging Markets Index Fund and iShares MSCI Emerging Markets.


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WELTRADE analyst



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