US Dollar Index ($USD) – 08-13-2008
Richard often leaves good comments here about the US Dollar’s weakness, so I decided to add my own notes about it. You could look at charts of the USD against the Euro or some other specific currency, but for a quick idea it’s helpful to check out the US Dollar Index ($USD on stockcharts.com) which just compares it against a basket of common currencies. As you already know, the USD has been diving for a while, but this chart puts the recent rally into perspective a little. With the huge national debt and inflation not getting any better, I don’t see this long term downtrend being broken at this point.
So what do you do with this info? Obviously you could play the forex markets, but that’s a whole different ball game if you’re used to equity trading. Something a little closer is to trade commodities, i.e. metals or oil. As the dollar goes down, these things typically go up. They were quite overbought before, but have been getting back in line recently—almost to a buyable point again. There are also plenty of stocks that are tied closely enough to these markets if you want to stick to equities, so keep an eye on them if the longer term trend of the USD heads back south.
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