What Is a Dollar Bear?

A dollar bear is a trading philosophy in which the investor believes the dollar is inferior currency and that other currencies will do better on the open market. This term is specific to the U.S. Dollar, but there are similar terms for other currencies. The dollar bear can be an American investor or someone from another country or region; if the former, the investor often thinks the dollar is weakening and trades in a way to make the best of that situation. On the foreign exchange market (Forex), this investor will typically trade for other currency types. The U.S. Dollar tends to be negatively affected by precious metal investments, so this investor also may invest in silver, platinum and other precious metals.

Dollar bear investors specifically are those investors who either see the U.S Dollar as a weakening currency that is doomed to fail or as a currency that will decline below other currency types. While this term is specific for American currency, there is a similar term for other currencies. For example, investors who have this outlook about the European Euro are commonly known as Euro bears.

While this view is against American currency, a fair number of dollar bear investors are Americans. Investors in other countries or regions typically have an easier time being unbiased about the U.S Dollar, but not always, and the U.S. Dollar is usually thought of as one of the stronger currencies. If these investors are American, then they often think the U.S. Dollar is declining, and they trade in a way to profit from the situation, just as they would with other currencies.

One market in which the dollar bear philosophy is pronounced is the Forex arena. This arena is specifically for trading currencies, so these traders will trade against the U.S. Dollar or exclude it from their trading portfolio. These investors believe the U.S. Dollar will decline, so investing in it would be like investing in a failing stock or share. At the same time, investors may have no problems investing in American businesses if doing so can be profitable.

The U.S. Dollar is known for not having a gold or silver backing, unlike many other currencies, but heavy investment in precious metals can still affect it. This means many dollar bear investors will purchase a higher than average amount of gold, platinum, silver and other precious metals. This is usually in an effort to protect against the U.S. Dollar’s decrease in value.