The Madness Of King Dollar
"Firm US growth and rising bond yields may keep the greenback supported over the short-term," Goldman said, in the course of throwing in the towel on a six-month-old short dollar call.
The bank described it as a "tactical retreat" following "a choppy few months."
Such are the perils of dollar shorts. There are myriad ways to make what's often described as a "structural" bear case against the greenback. Typically, that effort entails hand-wringing over deficits (plural) and pointing to the doll
there are few things that could go wrong, wonder which one is linked to the ongoing green back rise?
Ugh, FX.
I can’t forecast FX and have never found a source of reliable forecasts.
I’m sure some can forecast FX, but I’d guess their work is very proprietary.
For investors sharing my plight, I think a sensible approach is simply to treat FX sensitivity as a random risk factor and control your exposure to that risk. Basically, try not to bet on the USD either long or short – focus on less enervating ways to make money.
Another is to keep casuality in mind. Does the world become unfriendly because USD rises, or does USD rise because the world becomes unfriendly? If you believe it is mostly the latter – granting that reflexivity means it has to be a little of the former too – then it is easier to keep one’s sanity.