The Hot Macro Trade of 2021 Is Going Bust
- Fiscal, monetary stimulus goes from drag to fuel for greenback
- Some are cutting their shorts after currency’s January gains
Betting on a drop in the dollar was one of the most-popular macro trades heading into 2021. But after a painful start to the year, many are wondering whether they wrote off the greenback too quickly.
The argument was simple: a broad vaccination-led global recovery and a stimulus-fueled expansion of the U.S. deficit would encourage investors to favor assets outside America -- sinking the dollar and extending last year’s 5% plunge. Instead, a relatively successful vaccine rollout in the U.S. and signs that further government spending will do more to boost the domestic economy than weigh it down with debt have traders changing course. That’s buoyed rates, burnished the appeal of American investments, and prompted a rush to buy the currency this year.