$9 Trillion Short That Is Sending USD Rally Higher And Higher

USD is the most heavily used currency in the world. Almost something like 90% of the currency transactions involve USD on one side which can be buy or sell. As a currency trader we love to trade USD pairs like EURUSD, GBPUSD, USDJPY, NZDUSD, AUDUSD, USDCAD etc. So what’s happening now. USD has been appreciating for the last few months. When USD appreciates it send the other currencies down.  So how long will this USD rally go on?

Investors speculating the dollar rally is fizzling out may be overlooking trillions of reasons why it will keep on going.

There’s pent-up demand for the U.S. currency that will underpin years of appreciation because the world is “structurally short” the dollar, according to investor and former International Monetary Fund economist Stephen Jen.

Sovereign and corporate borrowers outside America owe a record $9 trillion in the U.S. currency, much of which will need repaying in coming years, data from the Bank for International Settlements show.

So don’t worry at all. This USD rally will continue in the months to come as their is sufficient short covering in USD that is fueling this rally. Since many countries have accrued huge dollar debts they will either repay that debt early in that case they will need to buy USD in the open market fueling this rally more and more or they can hedge. In that case also they need USD so the rally stays strong in the future as well.