Bet on the dollar

If you've been following me on Twitter you'll see I've been plugging my long Dollar | Yen position which has so far yielded some rewards.

The thinking behind this is four-fold.

1. There is the political instability around North Korea which is likely to lead to some volatility in the Asian markets (including presumably the currency markets)

2. As the economy (or more specifically the stock-market) has rebounded, there has been some flight from low yielding but perceived "safe" currencies such as the Yen into the Euro for its higher yield. I argue that the dollar sale has been overdone and in fact offers better value than the Euro.

3. While I still expect another market down-leg, the more the rally takes hold (particularly in the US) the more appetite there will be for the dollar - I don't see the currency alternative at the moment nor do I see something else that carries enough "size".

4. China, Japan and the rest of Asia all want the dollar to be strong relative to their currencies and logically they are not going to try and put some pressure on their own currencies to keep them weak relative to the dollar.

It is not a long term trading position - simply because I think there is too much volatility and earnings uncertainty everywhere but I think while everyone is keeping their eye on the Euro, I think the US dollar offers something a little different.