How to Short the Dollar

When you’re shorting a currency, you’re betting against its value increasing. This is a common strategy during periods of economic uncertainty or market volatility, and it can yield profits if your analysis proves correct. But executing this trading strategy isn’t as easy as it sounds.

How to Short the Dollar: Currencies are always traded in pairs. When you short a pair, you’re simultaneously selling the base currency and buying the quote currency with the expectation that the base currency will decrease in value. For example, when you short EUR/USD, you’re selling euros and buying dollars. If the euro weakens against the dollar, you can repurchase the euros for a lower price than the ones you sold them for, making a profit.

How to Short the Dollar: Profiting from a Falling USD

To make the most of your short USD trade, you need to understand what moves the currency’s price and how the market works. Ultimately, the dollar’s value depends on global supply and demand for it as a reserve currency. In addition, inflation is another factor that can affect the dollar’s value. If the economy experiences high inflation, it will cause the price of goods to rise, which in turn will reduce the value of the dollar.

To short the dollar, you can open a forex account and sell USD against other currency pairs. Or you can invest in exchange-traded funds (ETFs) that track an inverse index of the USD. If you choose the latter option, your risk will be less limited, but you’ll have to pay a premium for the exposure.