The noticeable rise in the US dollar price has caused many analysts to abandon their expectations of a slowdown in the US currency. At the beginning of this year, analysts expected the US dollar to fall against a basket of major currencies, especially the euro. Now they have to think about their strategy when investing when the dollar rises .
There have been many reasons put forward as to why the dollar has risen, and its growth has generally been attributed to several converging factors: US monetary policy that has led to the currency’s recovery despite the global pandemic, such as the country’s fiscal stimulus packages;
With the Dollar rallying, we also saw the price of Crude Oil drop, causing real shock waves to the markets. Oil and the US dollar are closely related in evolution, the main reason being that this commodity is capitalized in US dollars. Traditionally, when the US dollar rises, the price of oil falls, and vice versa. Market volatility can present a business challenge, but it can also create opportunities for investors willing to take risks. This article will talk about the top five strategies that can be used to invest when the US dollar is rising.
Investing when the dollar rises – take a step forward
Investors who follow the currency pairs containing the US dollar and bought the dollar at the beginning of the trend will do very well by investing when the dollar is rising. But be careful, as this trend can be stopped and will end at some point. The hallmark of a successful trader knows when to close a trade and make a profit.
Diversify your portfolio with CFDs
CFD investors make profits by anticipating the prices of certain assets. CFDs are derivative products that trade commodities (including oil), stocks, indices, and even currencies. There has been a massive increase in interest in CFDs, perhaps because we can take advantage of short positions on lower prices and long positions on higher prices. It’s a way to take advantage of a downtrend in the market, as we’ve seen in Crude Oil lately. CFDs are also helpful for hedging and protecting investments in a multi-asset portfolio.
Investing when the dollar rises – adjust your investments
With the US economy growing steadily, foreign investment has returned to the North American continent, which has a positive impact on US market shares. Stocks in the Eurozone and Japan continue to suffer from the effects of fiscal stimulus policies that make them appear less attractive to investors than US stocks. Higher interest rates in the US also help make US bonds more attractive to foreign investors.
Always think of the commodities
When the markets are highly volatile, investors turn to more stable investments, especially gold. While it appears that gold has an inverse price relationship with the dollar, it decreases with the rise of the dollar, but the relationship is not as close as the relationship between the US dollar and oil. This means that even though we are in a bullish period for the dollar, we may have “windows” to invest in gold that can benefit investors in the short term.
Investing when the dollar is rises – riding the wave of volatility
As US monetary policy increasingly diverges from that of the European Union or Japan, the signs are that 2021 has been a very volatile year in the FX markets. The difference in policy leads to sudden movements and opportunities in the foreign exchange markets that can be leveraged for financial gain. Just like in surfing, investors need the perfect ‘window’ to enter forex.