I don't know how overcrowded the short dollar trade is, but if the seeming consensus is anything to go by, the dollar is good for nothing and heading into the bowels of hell. Does it deserve to be trashed? Probably. Is it a one-way trade you can't lose on? I wouldn't be so sure about that.
The US has certainly done its best to debase the dollar, and the outlook sure don't look too pretty. But you've got to remember that the dollar is a unit of relative value and that it tends to run in 5-7 year cycles (and we're closer the end of this cycle than the beginning). In that context, the USD doesn't look all that bad. Throw in the fact that the current account is moving in the right direction, the Fed will raise rates sometime, the Chinese will likely revalue at some point, "hard currencies" are not so hard, the Europeans and Japanese are begging for relief, and it doesn't take too much imagination to see the dollar moving higher.
On second thoughts, I think I'll keep my dollars.
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