What is a Dollar Bull?

A dollar-bull is an investor who is optimistic about the value of the U.S. dollar (USD) and expects it to appreciate versus 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 versus 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 the currency pair.

Understanding Dollar-Bulls

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 the currency pair. 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.

For example, dollar-bulls could believe 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 GDP represented 50% of the world’s output, so it only made sense that the U.S dollar would become the global currency reserve.

Currency pairs are the national currencies from two countries coupled for trading on the foreign exchange (FX) marketplace. 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 one another, and the exchange rates will continuously fluctuate based on the respective changing in the relative values. The dollar-bull believes that stronger currency will end up being the U.S. dollar.

Dollar-Bulls and Dollar-Bears

The opposite of a dollar-bull is a dollar-bear. Bears believe that the value of the U.S. dollar will fall in relation to other currencies over time. 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.