Forex Blog

A lot is made about the safe-haven status of the US dollar and the inverse correlation it has with stocks and commodities.   When the economy is seemingly doing well, risk-takers look to sell dollars and buy higher-yielding, riskier currencies to earn interest.  This is more commonly known as a “carry trade” and I described it in an article last week.

The carry trade is a very easy way to make money and it was formerly only available to sophisticated investors.  Now, you can participate from the privacy of your own home!   The basic premise behind the carry trade is that you want to borrow a low-yielding currency and invest in a higher-yielding currency.  You make the difference in interest.  Sounds better than putting your cash in a bank savings account, doesn’t it?

*Do you know what one of the lowest yielding currencies is right now?  That’s right, it’s the US dollar!

And this is likely to continue for some time.  If the dollar is going to continue to decline, it doesn’t sound very safe at all, does it?  Here are a few reasons why the dollar decline will continue and why you should be concerned.

1.       The United Nations at their most recent meeting asserts the role of the US dollar should be reduced as the world’s reserve currency.  While this is “nothing new”, this time it may be different.  If the dollar continues to fall then alternate solutions may be sought.