The recent market swoon has coincided with a surge in the much-beleaguered greenback.
With Europe heading into financial chaos, and China threatening to bring down several emerging markets, investors are fleeing into the dollar, undermining the cheap-dollar carry trade.
So, how do you play a dollar surge, when by definition, most assets go down when the dollar is strengthening.
David Rosenberg of Gluskin Sheff ponders the question:
Since the onset of the credit crisis in 2007, there have seen three occasions when a surge in risk aversion caused a period of U.S. dollar strength on flight-to-safety trades — July 15, 2008 to September 11 2008 (around the GSEs); September 22, 2008 to November 21, 2008 (post-Lehman financial collapse) and then from December 17, 2008 to March 5, 2009 (the final leg down in the financials). Here is what happened, on average, during these dollar-rally episodes — ultra-defensive strategies and heightened volatility.
He then outlines 10 specific patterns...
How to take advantage of a surging dollar >
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See Also:
- Morgan Stanley: The Dollar Will Rally No Matter Where The Economy Goes
- The Goldman Sachs Guide To Surviving 2010
- How To Get A Job At Bloomberg