As a global reserve currency, the dollar’s value tends to be highly correlated with debt levels across the globe. When the dollar strengthens, it hurts those borrowers by making their dollar-denominated debts more expensive to service. Conversely, when the dollar weakens, it helps those borrowers by making their dollars more valuable relative to their local-currency income. This can create a vicious cycle as borrowers rush to buy dollars in order to service their debts, driving the dollar even higher.

So, if you’re shorting the dollar that the dollar will decline in value – also known as going short – it can be an excellent strategy to help mitigate your overall investment risk and generate potentially significant profits. But, be aware that trading leveraged positions carries substantial financial risks and you should always manage your risks prudently.

How to Short Global Stocks and Currencies from the UK

In order to short the dollar, you need to open a forex trading account. You can do this with a traditional broker or a CFD/spread betting company that offers forex pairs containing the US Dollar. Once you have an account, you can trade currency pairs based on your predictions that the USD will decline against other currencies.

When you are shorting the dollar, you don’t actually sell the dollar – you sell the pair (e.g. USD/EUR). This is because all forex trading is done in pairs. Then, once the price of the pair reaches a level that you believe is low enough, you ‘buy’ the pair and close out your position. You then profit from the difference in price, minus any trading fees.