What is the dollar-Bear
A dollar bear is a trader or speculator who uses a pessimistic strategy when trading United States dollar (USD) against other currencies. This strategy expects the United States dollar (USD) to lower against the other major currencies over time and will consider this factor when positioning investment portfolios.
As a rule, the dollar bear will take measures to protect themselves against what they see as an inevitable decline of the US dollar through moves such as liquidating their assets.
Breaking down the ‘dollar Bear’
The dollar-bear trader would adopt a financial strategy that includes a weak dollar. In fact, the weak dollar means that one U.S. dollar can be exchanged for fewer amounts of foreign currency. Some of the factors, not only economic fundamentals, could lead to a period of the weakening of the U.S. dollar. Bears can not know exactly how much money the dollar will fall against it, but they were firm in their belief that it would not meet expectations.
A bear market, as the weak dollar, will occur over a long period of months or years, not in the short term, such as days or weeks. A bear market is the opposite of the bull market where asset prices up. Investors who believe in the value of the dollar, then often called the bull investors. Bull an investor often take the opposite actions are an investor and invest in securities as long-term financial strategy.
Trade as the dollar-Bear
The dollar bear will take a short position on us dollar in a currency pair. To make a profit, the dollar should continue to fall. These dollar bears will be considered the us economy, the ratio of debt to expenditures, the surplus in the market, world prices of raw materials and the geopolitical climate in General. As reported in this article June 2018 CNBC, trade or tariff wars will also play a big role in how a bear or a bull trader will look at the value of the dollar. Their currency trading will focus on the currency pair where the dollar will remain weak.
Dollar bear traders can open a long EUR/USD pair, as the Euro rises, the dollar loses value. Because the U.S. dollar has a strong negative correlation with precious metals and commodities, and the dollar-bear can overweight their portfolio in assets such as gold and non-ferrous metals to hedge against further falls of the U.S. dollar.
Although the bull and Bear investors are considered as opposites with the bulls to be regarded as optimistic and the Bear, as the pessimistic, they just use investment strategies and may modify its position at any time, based on how they perceive the market. As these traders and speculators assess the relative strength of the dollar, they can look at the dollar index (usdx). This index allows traders follow the dollar’s value against a basket of select currencies.
Fiscal policy, interest rates, and dollar bears
In the period of budget tightening, when the fed will raise interest rates, the US dollar is likely to strengthen and this is good for dollar Bulls. On the contrary, there is a weak dollar in the period of financial easing, when the fed lowers interest rates, such as what happened in response to the Great recession. Using quantitative easing, the fed purchased large amounts of Treasury bonds and mortgage-backed securities backed by mortgages, in the bond market rallied, which pushed US interest rates to a record low. As interest rates fell, the U.S. dollar weakened significantly, thereby helping the dollar-bears.
Within two years (mid 2009 to mid 2011), the US dollar index (usdx) fell by 17 percent. However, four years later, the fed embarked on the rise, for the first time in eight years, the fate of the dollar turned around, and he was strengthened to do a ten-year maximum. In December 2016, when the fed moved interest rates by 0.25%, trading at 100 for the first time since 2003.
There was a lot of dollar bears throughout history. For example, in 2005 Forbes named Warren Buffett one of the most famous dollar bears. Between 2002 and 2005, the EUR/USD pair fell by 33%, and at that time, the table was obviously a negative in relation to the dollar.
But the most important thing in life, there are views on both sides bull and bear market. As reported by Barron’s in April 2018, Byron Vien, Blackstone Vice – Chairman and the ox, which predicts 3% growth, low inflation, and that interest rates will rise only moderately. On the bearish side, David theis, who ran the prudent Bear Fund until 2008, believes that the stock market will fall by 20 to 25 percent by the end of 2018, due to rising interest rates, rising budget deficit and surplus securities on the market.