The USD Pogo Stick – Explained

Consider that stocks ( even at these “lofty” levels) still only have a global market capitalization of slightly over $60 trillion. The global bond market is well over $100 trillion, and the global currency market trades OVER $5.3 trillion per day.

It is currencies, not stocks, where the most significant moves occur, as the currency markets are the largest, most liquid markets in the world. They are always first to move when things change.

So what’s changed?

The recent rise in USD has a number of contributing factors, and it’s extremely complex and likely a bit confusing.

On one hand we’ve got the simple “Yen Carry Trade” which we’ve discussed several times before, BUT we’ve also got “The U.S Carry Trade” where “USD itself ” has simply been borrowed on the cheap and invested elsewhere in search of yield.

The recent rise in USD “could” imply two very different things – pushing USD higher for two completely different “and somewhat opposing” reasons.

You’ve got The BOJ ( and anyone else for that matter gobbling up cheap Yen and using it to buy assets priced in USD ) – implying a continuation of “risk on”. Where as on the other hand you likely have “unwinding of The U.S Carry Trade” – where investors who have borrowed USD ( now perhaps fearing  a potential rise in interest rates etc.. ) are unwinding their investments abroad and repatriating USD – implying “risk off”!

Both trades contributing to a stronger U.S Dollar for completely opposite/opposing reasons!

It’s my belief that………..

please join me at for premium member services, real time trade alerts, weekly reporting and intraday commentary.

Leave a Reply