Basket Of USD Shorts

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DEFINITION of 'Basket Of USD Shorts'

A forex trading strategy that involves the sale of the U.S. dollar against a group of currencies, rather than against a single currency. The currency group involved in such a trading strategy is called a "basket."

INVESTOPEDIA EXPLAINS 'Basket Of USD Shorts'

This strategy would typically be employed by traders who are bearish on the U.S. dollar, and would prefer to have a short trading position on it. The basic rationale for using a basket to short the U.S. dollar is risk mitigation through diversification. In the event that the U.S. dollar strengthens appreciably, given that it may appreciate at differing rates against various currencies, the loss on a short position may be significantly lower if multiple currencies are involved in it, as opposed to a short position using a single currency.

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