USD as an Investment: A Practical Guide to Investing in the US Dollar 2024

The US dollar is much more than just a currency – it is the foundation of the global financial markets. Approximately 88% of the daily trading volume in the forex market is conducted in this currency. For anyone looking to invest money in dollars, this presents a unique opportunity. This guide explains why the US currency is attractive to investors, which market factors influence the exchange rate, and which specific strategies could be promising in 2024.

What makes the dollar so valuable for investors?

Those who decide to invest money in dollars benefit from several fundamental advantages:

The economic superpower behind it: With a GDP of 27.36 trillion USD (2023), the USA is at the top of the global economy. The dollar is thus the currency of the world’s strongest economy.

Safety in uncertain times: The dollar is considered a “safe haven.” When global markets become turbulent, capital flows specifically into this currency. The combined political and military strength of the USA underscores this trust position.

Unlimited tradability: 24 hours a day, every trading day – the dollar can be traded at any time in high volume. This massive liquidity allows for quick entry and exit without large price jumps.

Portfolio hedging: By adding dollar positions, fluctuations in other assets can be offset, reducing overall risk.

Guaranteed global demand: Countries, corporations, and private investors worldwide constantly need dollars. This uninterrupted demand stabilizes the value in the long term.

What forces move the dollar exchange rate?

Understanding the influencing factors is essential for successful dollar investing:

Federal Reserve monetary policy

The Fed indirectly determines the strength of the dollar through its key interest rate decisions. Higher interest rates lead to two effects: First, the available money supply (supply contraction) decreases. Second, dollar investments become more attractive to foreign investors – demand increases. Both factors strengthen the currency.

Conversely: interest rate cuts make the dollar cheaper and less attractive.

Global demand and currency competition

Dozens of countries peg their own currency to the dollar or use it as a transaction currency. Especially in commodity trading – whether oil, gold, or agricultural products – payments are almost exclusively made in dollars.

But there are challengers: The Chinese yuan (RMB), the Japanese yen, the euro, and other currencies are gaining market share. The BRICS countries explicitly aim for “de-dollarization.”

The numbers speak plainly: In 1999, the dollar accounted for 71% of all international currency reserves, but by 2024, it is only 59% (Source: IMF). A steady decline – yet the dollar remains the undisputed number one.

US economic strength

Strong economic growth in the USA attracts investors who need dollars. In Q2 2024, US GDP grew by 3% – compared to: Eurozone 0.3%, China 0.7%. This discrepancy explains the continued strength of the dollar.

Trade balance

If America exports more products abroad than it imports, the demand for dollars increases. Buyers must pay in dollars after all. The opposite is true: the USA has a massive trade deficit of 773.4 billion USD (2023). This puts downward pressure on the rate – a chronic risk for dollar investors.

Geopolitics and security

Crises outside the USA paradoxically strengthen the dollar. The Ukraine war scenario in 2022 was a textbook example: the EUR/USD rate fell to 20-year lows. Investors fled into the “safe” dollar.

It would be different with domestic political upheavals in America. Budget debates, trust crises, or election turbulence could damage confidence and withdraw capital.

The dollar index (DXY) – The overall barometer

To correctly assess the dollar’s development, professionals use the US Dollar Index (DXY). This basket measures the dollar against six major currencies:

• Euro: 57.6% weighting
• Yen: 13.6%
• British Pound: 11.9%
• Canadian Dollar: 9.1%
• Swedish Krona: 4.2%
• Swiss Franc: 3.6%

Historical milestones illustrate volatility:

• 1984: Peak at 151.47 (Reagan reforms)
• 1992: Low at 77 (Plaza Accord effect)
• 2001: Rise after 9/11 to 118.54
• 2008: Financial crisis drops to 71.30
• 2022: Rebound to 110.05

Despite fluctuations: The DXY shows lasting stability – the dollar recovers repeatedly.

Dollar outlook 2024: Stability phase with risks

Current situation: The dollar is in a stable strength position. The reasons:

• Robust economy: While other countries stagnate, the USA grows.
• Tight monetary policy: With a 5.5% key interest rate, the dollar remains attractive.
• Limited rate cut expectations: The Fed will not loosen aggressively – this would weaken the dollar too much.

Election risk in November: A Trump victory could bring inflationary policies (tariffs, tax cuts) – likely strengthening the dollar, unless he hampers Fed independence. A Harris victory would likely mean status quo with a functioning Congress – neutral to slightly negative for the dollar.

Currency pairs in 2024:

EUR/USD: The euro is under pressure. Target rate in case of eurozone weakness: 1.08-1.06. Only above 1.1350 could there be a recovery.

USD/JPY: Diverging interest rate expectations drive apart: Fed cuts, Bank of Japan tightens. Technical target: 141.60 (August low) in case of further decline.

USD/TRY: The Turkish lira collapses against the dollar. Despite a 50% interest rate, inflation remains at 61.8%. Rates of 35-40 are realistic, analysts see 43 by 2026.

Concrete ways to invest money in dollars

Forex direct trading (Margin trading)

Suitable for: Experienced traders with a time horizon of hours to weeks

• Advantage: 24/5 trading, extremely high liquidity, leverage possible
• Advantage: With 1:30 leverage, only 1,000 USD equity needed for a 30,000 USD position
• Disadvantage: Gains AND losses multiply – high risk
• Tool: Open an account with a forex broker, trade EUR/USD or other pairs

Currency futures

Suitable for: Professional traders and companies with longer-term intentions

• Advantage: Transparent, standardized contracts with clear expiration dates
• Advantage: High liquidity at the Chicago Mercantile Exchange (CME)
• Disadvantage: Complexity, minimum experience required, margin requirements
• Process: Obligation to buy a specified USD amount at a fixed rate at maturity

CFD speculation (Contract for Difference)

Suitable for: Traders who want to bet on both directions

• Advantage: Tradable with leverage, long AND short possible
• Advantage: No physical currency delivery needed
• Disadvantage: OTC trading (directly with broker, not exchange) – higher spreads
• Disadvantage: High default risk if broker problems occur
• Use: Ideal for tactical moves, less for buy&hold

US dollar savings bonds and deposit certificates (CDs)

Suitable for: Conservative investors prioritizing capital protection

• Advantage: Minimal risk, guaranteed return known in advance
• Advantage: Open a USD account with a US bank or German financial institution – done
• Advantage: Good inflation protection through ongoing interest
• Disadvantage: Yields significantly lower than volatile instruments
• Disadvantage: Capital locked for a fixed term
• Strategy: Ideal for long-term savings, not for traders

Conclusion: The dollar remains indispensable

For everyone looking to invest money in dollars, a simple rule applies: the right instrument depends on your profile.

Conservative savers invest in USD savings bonds and CDs. They sleep peacefully and earn safe interest.

Tactical traders use forex and CFDs. They catch small and large price waves.

Strategic investors use futures for longer-term positions.

The fundamental remains: the dollar will not disappear. Its role in the global financial system is too deeply rooted. Competition from the yuan or euro will change little in the medium term. So if you want to invest in dollars, you are investing in a proven, stable currency – with all the opportunities and risks that professional investing entails.