The Bullish Case for the U.S. Dollar

With negativity running rampant on the U.S. dollar, and with virtually no-one on the bullish side, I thought it worth relating one factoid. One of the smartest fund managers I know conceded to me mid-day today that he is, as of today, massively long the U.S. dollar.

For now, he admits, it’s just a trade. But he also thinks that there could be a stampede back to the currency in shorter order than anyone thinks.

His argument, in part,  is that the Euro and the renminbi aren’t anything like safe havens, with high potential for serious institutional meltdowns in both the Eurozone and in China, either of which would cause capital to race back to the USD, and be further accelerated by short-covering.

Longer term, he thinks the market will start looking to a change in U.S. administrations next November, see signs that the fiscal scene will change, and have a change of heart. We won’t see exchange rates of seven years ago, but we would see rates from 1 year ago….

Food for thought.

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Comments

  1. CrossProfit says:

    Why would a meltdown in China be as bad as a U.S. meltdown?
    The U.S. meltdown has started and China is a maybe at best.
    The U.S. is $9+ trillon in the red and red China is $1.4 trillion in the black.
    I don’t follow the logic.
    Disclosure: Opinion of CrossProfit analyst and may not portray the opinion of crossprofit.com.

  2. ak says:

    Paul Krugman put the dollar at #5 on his list of worries today when asked about it on NPR… I guess I don’t get the lack of concern either – but Krugman certainly no friend of this administration, didn’t seem very concerned about it.