From the earliest days of the most recent financial crisis the U.S. dollar has been beaten up by, not just Wall Street, but Main Street as well. That’s all about to change says Jonathan Hoenig of Capitalistpig.com.
“We’ve talked about that weak dollar literally for years,” he says, “and I think now is actually the time to reverse that trade and go long the dollar.”
Hoenig says a rising short term interest rate is one catalyst behind his call for a surging greenback. A more attractive investment environment here in the states is also helping. “Look at the turmoil in Europe,” Hoenig notes, “not just economic but geo-political as well. And it’s not hard to imagine why the Euro is sinking.”
Hoenig points to the U.S. dollar index which is tied closely to the price of the Euro. “So when the Euro sinks the U.S. dollar moves higher.” He also notes that while trading currencies was once reserved those with indepth knowledge of those markets, the proliferation of ETFs, is changing all that. Hoening specifically mentions the PowerShares DB U.S. Dollar Bullish ETF (UUP), “an exchange traded fund that follows the value of the dollar. Anyone can play this and I think it’s a trend worth investigating.”
Regardless of whether or not you decide to get into the buck here or not there’s a larger investing lesson to be learned. “You always want to try and be a contrarian,” Hoenig advises. “At a time when most people think the U.S. dollar is gonna collapse I think now is actually the time to buy it and go long.”
- Jonathan Hoenig