Get set for the next great $US bull run

In real terms, the cycles in the US dollar index since the early 1970s have been fairly large and relatively uniform. There have been two major upturns – starting in 1978 and 1995 – each spanning just over 6 years and producing 52% and 34% gains respectively. There have also been two long term downturns – starting in 1985 and 2002 – each lasting around 10 years, and producing US dollar index declines of around 30%.
The real exchange rate last bottomed in mid-2011, and has lifted by around 8% over the past 3 years. If history is any guide, we have around three-and-half years in the current upturn to run, which could produce 20-40% of upside real gains. Fundamentals also support further US dollar strength, with the US economy displaying greater dynamism than those of Europe and Japan, and US interest rates more likely to rise in the coming year.
Investors seeking simple, low cost exposure to the performance of the US dollar relative to the AUD can do so with the BetaShares US Dollar ETF (ASX Code: USD), which trades on the Australian Securities Exchange. The ETF is backed by physical US Dollars, and is designed such that if the US Dollar goes up by, say, 10% against the A$, the ETF should rise by 10% also – before fees and expenses. The ETF’s annual management fee is 0.45%.
For more of David Bassanese's market insights, visit the BetaShares blog. For more information on BetaShares products, go to the main BetaShares website.
Frequently Asked Questions about this Article…
A US dollar bull run is a period during which the value of the US dollar increases significantly against other currencies. Historically, these cycles have lasted between 6 and 10 years, with notable upturns starting in 1978 and 1995.
During past bull runs, the US dollar has seen gains of 34% to 52%. The current cycle, if it follows historical patterns, could see an increase of 20-40% in real terms.
The current US dollar bull run is supported by the US economy's greater dynamism compared to Europe and Japan, as well as the likelihood of rising US interest rates in the coming year.
Investors can gain exposure to the US dollar's performance through the BetaShares US Dollar ETF (ASX Code: USD), which is traded on the Australian Securities Exchange and is backed by physical US dollars.
The BetaShares US Dollar ETF has an annual management fee of 0.45%.
The BetaShares US Dollar ETF is designed to mirror the performance of the US dollar against the Australian dollar. If the US dollar rises by 10% against the AUD, the ETF should also rise by 10%, before fees and expenses.
For more market insights from David Bassanese, you can visit the BetaShares blog.
To learn more about BetaShares products, you can visit the main BetaShares website.