USD Investment in 2024: A Trader's Perspective on the World's Most Important Reserve Currency

The US dollar is more than just currency; it is the lifeblood of the global financial markets. 88% of daily trading volume in the Forex market flows into the US dollar, a figure that says it all. But the question is: how can ordinary traders participate? To invest in the dollar, you first need to understand why it is so valuable.

Why Focus on the US Dollar in 2024

Currently, the US dollar is in a strong cycle. The logic is simple: the US economy is the largest (2023 GDP reaching $27.36 trillion), with undisputed political and military power, making the dollar the safest global asset for risk aversion.

Historical experience shows that when geopolitical uncertainties arise, smart money always flows into the dollar. During the Russia-Ukraine conflict in 2022, the Dollar Index (DXY) surged above 110, hitting a 20-year high.

Key supporting factors:

• The Federal Reserve’s current interest rate at 5.5%, relatively high, attracting international capital
• US Q2 GDP growth at 3%, far surpassing Europe (0.3%) and China (0.7%)
• As the global settlement currency, demand for the dollar never wanes

But don’t be overly optimistic. Data from the International Monetary Fund shows that the dollar’s share in global foreign exchange reserves has fallen from 71% in 1999 to 59% in early 2024, reflecting long-term structural pressures—especially from emerging reserve currencies like the Renminbi.

Five Key Variables Influencing the Dollar’s Movement

To profit from investing in the dollar, you need to understand what drives its price.

First, the Federal Reserve’s interest rate policy. The higher the interest rate, the more valuable the dollar—because dollar assets yield more, attracting international investors. Conversely, if the market expects the Fed to cut rates in the second half of the year, it will put pressure on the dollar.

Second, trade flows. The US has a long-term trade deficit (reaching $77.34 billion in 2023), meaning dollars are continuously flowing out. Imagine foreign companies buying US goods—they first need to exchange for dollars. If imports far exceed exports, dollar supply increases, leading to a decline in its price.

Third, economic growth. Strong economy → attract investment → need dollars. This simple but effective logic.

Fourth, geopolitical factors. It may sound counterintuitive, but crises often benefit the dollar. In 2022, during the Ukraine war, the world flocked to buy dollars as a safe haven. As long as the risk isn’t centered in the US, this logic holds.

Fifth, the movements of competitors. Economic downturns in Europe, the European Central Bank tightening policy, and the internationalization of the Renminbi—all these change currency pair valuations. The most direct manifestations are in EUR/USD, USD/JPY, and USD/TRY exchange rates.

Technical Analysis of Three Key Currency Pairs

EUR/USD: Euro faces long-term pressure

The euro is currently stuck in the 1.10-1.12 range. Technically, the 200-day moving average is at 1.0852. If the European economy continues to weaken (Germany especially at risk), the pair could fall toward 1.0610.

The long-term trend? As long as the euro cannot effectively break through 1.12750 (the 61.8% Fibonacci retracement), downward pressure will persist. Seeing 1.04-1.06 in 2025 is not unlikely.

USD/JPY: Yen faces appreciation pressure

The Bank of Japan has started tightening, while the Fed is beginning to loosen—this contrast is strengthening the yen and weakening the dollar against the yen. Technically, it has tested the 146 level multiple times without success; the next target is around 141.60.

The key here is interest rate differentials. As long as the US-Japan interest rate gap exists, this pair has room to decline.

USD/TRY: Turkey Lira’s dilemma

This is the most extreme example. Turkey’s central bank aggressively hikes rates to 50%, yet inflation remains high at 61.8%. The result? The dollar against the lira surges, breaking historical highs.

Analysts generally expect this pair to reach 35-40, with some forecasts (by 2026) even reaching 43. This reflects fundamental issues within the country’s economy.

How to Participate: Comparing Five Investment Tools

1. Forex Spot Trading

Risk Level: ⭐⭐⭐⭐
Threshold: Low
Suitable for: Those wanting quick trades

Open an account with a forex broker, buy and sell currency pairs. Leverage (e.g., 1:30) can be used, allowing $1,000 to control a $30,000 position. The advantage is high liquidity, tradable 24 hours. The obvious downside—leverage is a double-edged sword; profits come fast, losses can come just as quickly.

2. US Dollar Futures

Risk Level: ⭐⭐⭐⭐
Threshold: Medium
Suitable for: Institutions and professional traders

Trade standardized contracts on the Chicago Mercantile Exchange (CME). Advantages include transparent pricing and good liquidity, suitable for speculation or hedging. Disadvantages are the need for professional knowledge and sufficient capital.

3. CFDs (Contracts for Difference)

Risk Level: ⭐⭐⭐⭐⭐
Threshold: Low
Suitable for: Short-term traders with risk tolerance

No need to hold actual dollars—just bet on the price direction. Can go long (bullish) or short (bearish). Traded OTC (over-the-counter), directly with brokers. High returns come with high risks—the speed of account blow-up can catch you off guard.

4. US Dollar Certificates of Deposit (CDs) & Savings Accounts

Risk Level: ⭐
Threshold: Low
Suitable for: Conservative investors

The safest way. Open a USD account at a US bank, earn fixed interest. Currently, short-term US rates are around 5%, very stable. The downside is fixed returns, limited liquidity, and limited inflation hedging.

5. US Dollar Asset Allocation (US Treasuries, US stock funds, etc.)

Risk Level: ⭐⭐
Threshold: Medium
Suitable for: Long-term investors

Indirectly hold dollars by buying US Treasuries or US stock funds. Participate in US economic growth and benefit from exchange rate appreciation. This is a standard strategy for institutions and high-net-worth individuals.

Two Major Variables in the Second Half of 2024: Elections and Rate Cuts

Will the US elections influence the dollar? Theoretically yes, practically not necessarily dramatically.

If Trump wins: possible tax hikes, rate hikes, tariffs—two of which favor the dollar, the third could hurt the economy. If Harris wins: increased fiscal spending, and the Fed might have more independence. Regardless of who wins, markets have already priced in these possibilities.

Federal Reserve rate cuts are another key factor. Currently, the market expects at least a 100 basis point cut in the second half. This will reduce the dollar’s attractiveness but won’t destroy it. The dollar’s strong fundamentals (size, political power, liquidity) won’t collapse after a few rate cuts.

Most realistic forecast: the dollar remains strong but won’t skyrocket. The euro may gradually strengthen, the yen may weaken, and other emerging market currencies will still be under pressure.

Final Advice for Investing in the Dollar

To invest in the dollar, ask yourself three questions:

One, am I a short-term trader or a long-term holder?
Use CFDs or futures for quick in-and-out trades. For long-term, allocate dollar assets or CDs.

Two, how strong is my risk tolerance?
If you fear liquidation, avoid leverage. If you can accept principal fluctuations, consider forex or futures.

Three, where are the market opportunities now?
In 2024, the Fed’s rate cut expectations favor shorting the dollar. But the US economy remains resilient, which favors bullishness on the dollar. That’s why smart traders often hold multiple positions—to hedge risks and wait for opportunities.

Ultimately, investing in the dollar is a bet on the US. Betting that its economy, politics, and military strength will continue to dominate global finance. History shows this bet is still right—at least in 2024.