What Is a Dollar Bull?

A dollar bull is an investor or trader who is optimistic about the value of the U.S. dollar (USD) and expects it to appreciate relative to other major currencies.

Key Takeaways

  • A dollar bull is an investor who is optimistic about the value of the U.S. dollar (USD) and expects it to appreciate relative to other major currencies.
  • Some investors are perpetual dollar bulls, in that they hold the general view that it is sheer folly to bet in the long term against the U.S. economy and, by extension, the U.S. dollar.
  • Dollar bulls consider many factors, such as the economy, debt-to-spending ratio, market surplus, global commodity prices, and the geopolitical climate as a whole, to account for their view for both the dollar and the corresponding currency in a currency pair.
  • Investors who are pessimistic about the value of the U.S. dollar are known as dollar bears.

Understanding a Dollar Bull

The term "dollar bull" is used in currency trading (forex trading) and can be applied to long-term and short-term views of the U.S. dollar in relation to other global currencies. An individual who is pessimistic about the value of the U.S. dollar when compared to other currencies is known as a dollar bear.

Not to be confused with a dollar bill, a dollar bull is a forex trader, or speculator, who expects the U.S. dollar to rise in value with respect to the major currencies over time and will position their trades, or investment portfolios, to reflect this view. Their actions will even tend to support and strengthen the currency.

Some investors are perpetual dollar bulls, in that they hold the general view that it is sheer folly to bet in the long term against the U.S. economy and, by extension, the U.S. dollar. They might not know exactly which currency the dollar will outperform against, but they are firm in their view that it will exceed expectations.

Dollar bulls consider many factors to account for their view for both the dollar and the corresponding currency in a currency pair. (Currency pairs are the national currencies from two countries coupled for trading on the foreign exchange [FX] marketplace. )These factors may include the economy, debt-to-spending ratio, market surplus, global commodity prices, and the geopolitical climate as a whole and their impact on both nations.

Dollar bulls could believe, for example, that the greenback will increase in value as long as it remains the world's dominant reserve currency. Being a reserve currency requires the backing of a stable and secure economy and government, such as that of the United States. The post-war emergence of the U.S. as the predominant economic power had enormous implications for the global economy. At one time, its gross domestic product (GDP) represented 40% of the world’s output, so it only made sense that the U.S dollar would become the global currency reserve.

A widely traded currency pair is the euro against the U.S. dollar, typically shown as EUR/USD. It is the most liquid currency pair in the world because it is the most heavily traded. The currency pairs serve to set the value of each other, and the exchange rates will continuously fluctuate based on the respective changes in their relative values.

The dollar bull believes that the stronger currency in a currency pair will end up being the U.S. dollar.

Dollar Bull Vs. Dollar Bear

The opposite of a dollar bull is a dollar bear. A dollar bear expects the U.S. dollar to decline against major currencies over time and will take this factor into consideration when positioning investment portfolios and placing trades.

A dollar bear's view can also be long term or short term and impacted not necessarily by the belief that the economic strength of the U.S. will deteriorate, but rather that certain situations may weaken the economy at home, such as trade wars, fluctuating interest rates, and poor government policy.

The USD weakened against the EUR during the coronavirus pandemic, for example, because of the Trump administration's poor handling of the crisis, which severely impacted the economy of the U.S. The administration's inability to control the virus and the havoc that it wreaked led many investors, both domestic and foreign, to doubt the strength of the USD in the near term.