my outlook for the US dollar is extremely grim and i’m looking for the best way to take advantage if my predictions come to fruition. I was hoping to purely short sell the US dollar, but after a little but of research it seems to me that in order to short sell the US dollar i would be forced to buy another currency, as they always trade in pairs? is this true?
So, my question is…is it possible to simply short sell the US dollar and not have to worry about any other specific currencies?
Look at it this way, Moe: how would you [U]determine[/U] if the dollar had fallen in value, other than by comparing its value with another currency, with the gold price, or whatever. What is “value”? It means “what something is worth”, doesn’t it? But that’s got to be measured in some kind of “units”, hasn’t it?
From the perspective of currency trading, when you “short the dollar”, you’re selling dollars. When you sell something, you get paid for it, which gives rise to the question in “in what currency do you want to be paid?”.
If your view is bearish on the USD, but you have no view on any other currency, you could perhaps “divide your trade” and buy GBP/USD and EUR/USD and sell USD/CHF and USD/JPY and maybe USD/CAD? (But you’ll pay more in dealing costs, that way).
There are instruments like the US dollar index, also, but that’s indirectly a way of doing the same thing, and it isn’t “forex trading”.
hii,
you can see it like this, if you just want to trade dollar, you can trade on the US dollar index. dollar index is gauge of dollar strength over its major peers. well i ll advice if you want to trade and have bearish outlook for the dollar, you can hedge your position by buying its major peers. its purely depend on you, how you can formulate your strategy and hedge your risk with which currency pair.
Buying virtually anything that is durable with U.S. dollars is taking a dollar short position, but especially so if you borrow the dollars. Buying stock is shorting the U.S. dollar especially if you are doing it with margin dollars. If you are afraid of all currencies then you can buy land or collectibles or something. But the truth is that equity in an income generating enterprise does better than anything in the ultimate long run. Once in a while there can be special markets that if timed right can beat equities but that is expensive to do and will ultimately underperform equities in the long run.
If you are interested in starting your own business, a business trading in financial instruments such as fx could generate income and protect you against dollar weakness. If you are totally fearful that the dollar will go into hyperinflation, relax. I am the most Misesian person you will ever talk to and even I don’t buy Peter Schiff’s “the dollar is falling!” scare talk. Don’t get me wrong, he and those like him were dead right about the real estate bubble and dead right about the long term problems of the U.S./global monetary system, but he is also a gold salesman and you have to keep that in mind. And if you are positioned for a massive drop in the value of the dollar and we only get a small one, you may be forgoing better profit opportunities. It is much more likely that the coming decade(s) for the dollar and for U.S. equities will be like the last decade or so for the Yen and for Japanese equities, much more likely than something that looks like Weimar 1920. FX will be very profitable if indeed currencies do a lot of gyrating amidst a global currency war and if we do get something like Weimar hyperinflation, then fx traders will make a very large profit (and many fx dealers allow you to have your account denominated in the currency of your choice). So fx may be for you.
If you want to short the dollar against all currencies, or against as many as possible, the previously mentioned dollar index is an option. Taking many positions with an FX dealer is another option. Another would be to get into ETFs that will benefit from dollar weakness such as UDN which shorts index futures that benefit when the dollar falls against the following underlying currencies: Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc. Another would be to buy equity in a firm based in a foreign currency such as the Yen or the Euro.