2024 Dollar Exchange Rate Investment Strategy | Guide to US Dollar Trading Methods and Market Outlook

Reasons to Invest in the Dollar: The Appeal of the Reserve Currency

In the global financial markets, the US dollar functions beyond just a currency; it serves as the central axis of international transactions. This position, based on the size of the US economy, political stability, and international influence, is a key reason why investors include the dollar in their portfolios.

Stability: Even during unstable times like global financial crises, the dollar maintains its value relatively well. The robust US financial system underpins this stability.

High Liquidity: As the most actively traded currency worldwide, investors can quickly buy and sell as needed. This reduces transaction costs and enables rapid decision-making.

Portfolio Diversification: It is advantageous for generating returns through exchange rate fluctuations and establishing global asset allocation strategies.

From novice investors to experienced traders, dollar investing is no longer an exclusive domain of experts. Various investment options are available, allowing individuals to choose according to their goals and risk appetite.

Key Factors Influencing Exchange Rates

Federal Reserve( of the United States) Fed### Monetary Policy

Interest rates have the most direct impact on the dollar’s value. When rates rise, foreign investors seek higher returns, leading to increased demand for dollar assets. Conversely, signals of rate cuts tend to weaken the dollar.

Changes in Money Supply

Quantitative easing or tightening policies by central banks directly control the dollar supply. An increase in money supply tends to lower the dollar’s value, while tightening policies support dollar strength.

The US’s Economic, Political, and Military Standing

US economic growth, political stability, and military strength enhance the dollar’s global credibility. The use of the dollar as a primary settlement currency in international trade also reflects this.

( Movements of Major Alternative Currencies

Changes in other reserve currencies like the euro and yen, as well as policy decisions by institutions such as the European Central Bank) ECB( and the Bank of Japan) BOJ(, influence the dollar exchange rate.

Major Historical Fluctuations in Dollar Exchange Rates

2008 Financial Crisis: As investors sought safe assets, demand for the dollar surged. USD/EUR rose over 25%, from 0.62 euros to around 0.80 euros.

Post-2015 Fed Rate Hike Cycle: The dollar remained strong, with USD/JPY surpassing 120 yen and USD/EUR rising to about 0.95 euros.

US-China Trade Tensions)2018~2019###: Amid global supply chain shocks caused by tariff disputes, the yuan weakened, and USD/CNY rose from 6.3 to 7.1 yuan.

Early COVID-19 Pandemic: Economic uncertainty boosted the dollar again. Later, large-scale stimulus measures and rate cuts increased volatility.

Middle Eastern Geopolitical Tensions: Oil supply disruptions caused USD/JPY to jump from 115 yen to 125 yen, and resource-exporting currencies also weakened against the dollar.

Outlook and Investment Opportunities for the Dollar in 2024

( Outlook for Major Currency Pairs

USD/KRW ) Won(: Korea’s strong exports and competitiveness in semiconductors and electronics are expected to support the won’s strength. Experts forecast trading between 1,350 and 1,400 won.

USD/JPY ) Yen(: If the Bank of Japan continues its easing policies, the yen is likely to remain weak. In the second half of 2024, it could rise to 140–145 yen. However, rate hikes could increase volatility.

EUR/USD ) Euro###: The exchange rate will depend on the European Central Bank’s monetary policy and economic recovery pace. Experts expect trading between 1.05 and 1.10 euros in the second half of 2024.

Comparing Methods of Investing in the Dollar

Bank Exchange

The most accessible and safest method. You can acquire dollars long-term through cash holdings or foreign currency deposits. Preferred by beginners, but involves exchange fees and currency conversion risks.

Forex Margin Trading

Leverage allows large trades with small capital. It offers high short-term profit potential but is high-risk. Suitable for experienced investors who understand market volatility well.

( Forex Futures

Trading dollars at a predetermined price at a specific future date. CME Group’s dollar index futures) DXY### are among the most traded products globally, widely used by companies and institutional investors for hedging.

( CFD) Contract for Difference###

Profit can be made through exchange rate movements, and leverage allows trading with less capital. However, high market volatility increases the risk of losses, so it is recommended for skilled investors.

Developing a Successful Dollar Investment Strategy

Portfolio Diversification

To reduce risks associated with exchange rate fluctuations, it is important to diversify investments across multiple currencies and assets. Avoid over-concentration in any single currency.

Monitoring Economic Indicators

Continuously track US interest rate policies, employment data, GDP growth, etc., to predict exchange rate movements. Paying attention to market news and economic calendars can improve timing.

Thorough Risk Management

Set investment limits in advance and hold a certain portion of funds in cash. Especially for high-leverage trades, proper position size management is essential.

Conclusion: Dollar Investment Trends for 2024–2025

The Fed’s interest rate policies, global economic growth, and geopolitical factors will be key determinants of the dollar exchange rate. Experts see a higher likelihood of rate freezes or cuts, which could lead to relative strength in the euro and yen, and weakness in the won.

Dollar investing is more than just seeking exchange rate gains; it is a strategic tool to respond to global economic changes and systematically grow assets. Before investing, closely observe policy shifts and macroeconomic trends in each country, and adjust positions flexibly to succeed.