A dollar bull believes that the US dollar is likely to perform well against other currencies. These investors may concentrate their activities on moves that will take advantage of anticipated rises in value for the US dollar. Their optimism can be short or long term, based on analysis, experience, and input from commentators and experts familiar with the markets. Several funds and indices are based on the performance of the dollar and can be used as investment tools by a dollar bull.
These investors have a number of reasons for believing that the US dollar is likely to be stronger than other currencies. One is past performance; this currency tends to be highly stable, and does tend to do better than other foreign currencies. For these reasons, it’s often used to denominate international trade and may be specifically requested in some transactions by investors who want to reduce the risk of losses in association with currency fluctuation.
Anticipated upticks in the economy of the United States can be another motivator for a dollar bull, who may argue that these will cause a surge in value. This can be balanced against how the country manages debt and the deficit. Political events can play a role as well; nations with historically strong currencies might not be strong investments if they are in a state of turmoil, for example, or if their markets appear to be falling. The US dollar tends to rally quickly, even after taking a fall, and can be a good investment for that reason.
Someone taking a short position believes that the US dollar is likely to increase in value quickly when compared to another currency. Investors can take out contracts and may engage in other activities to open a position, waiting for the exchange rate to hit the right point so they can take advantage of it. A long term dollar bull believes that the US dollar will be valuable in the future, and makes a sound investment and potential store of value. When other investments are weak or highly volatile, sinking funds into reliable assets or options contracts may be considered a sound strategic move.
Investment strategies can be highly variable, and not all dollar bulls behave in the same way. Many may want to maintain diverse investments even while taking useful positions with respect to the US dollar. A dollar bull may choose to invest in several different areas of the market to spread opportunities and reduce exposure to risk.