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As world economies get depressed from the ripple effect of US depression, the dollar index can actually appreciate
Kirsten McLauren
Feb. 2, 2008
The US Dollar is forming a long term base. The major US rate cut is behind us. It is time for the ECB to cut rates. The Bank of England will also cuts rates. The economic depression in US and financial meltdown is already built into US Dollar index.
The next wave of rate cuts will start in Europe. The Chinese and the Indian currencies will appreciate against US Dollar. But they are not part of the US Dollar index. Other than Yen, all the currencies may fall against dollar in the several years. A very long term bottom is in place in US Dollar.
The Dollar index currently trades around 75.50. It can rally 15% in the next nine months to reach 87.00. While trading US Dollar index the best strategy is to opt for futures and options arbitrage. For example buying US Dollar index futures, selling an in the money call on the same and buying a distant put on the future can be ideal.
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