Why Dollar Upside Could be Limited

Recently, President Donald Trump projected that the dollar would gather momentum as the U.S. economy expands. Following the president’s remarks, the dollar pared its decline that was triggered the day before when Treasury Secretary Steven Mnuchin said a weak dollar benefited the U.S. economy, which many observers took as a indirect support for a weak dollar outlook.

“In addition, strong global growth environments have historically led to a weaker US dollar, as US investors seek higher risk premia abroad and non-US investors stay home,” according to Invesco. We do not believe corporate repatriation flows will be a large driver of US dollar price action. Foreign profits are already largely held in dollar-denominated assets, and repatriation is likely to occur over many years.

Traders considering a bearish position on the dollar can consider the PowerShares DB US Dollar Index Bearish (NYSEArca: UDN), an inverse though not leveraged bet against the greenback.

For more information on the USD, visit our U.S. dollar category.