Some of the dollar’s recent strength has come against the euro, following a series of statements made by the European Central Bank’s president, Mario Draghi, that were interpreted by currency traders to be supportive of a weak euro. Many European economists say that, in light of the E.C.B.’s institutional restraints, a weak euro that would jump-start exports is the easiest way to spur growth in the eurozone.Since Mr. Draghi touched on some of these issues during his speech in Jackson Hole, Wyo., in late August, the euro has lost significant ground against the dollar, a move that has taken many traders and analysts by surprise.Traders have subsequently added to their bets that the euro will continue to fall, pointing to such long-term problems as anemic growth and persistent unease over Europe’s banks. Data from the United States Commodity Futures Trading Commission shows that the short positions on the euro are the most popular currency trades.But it is against the Japanese yen that the dollar’s move has been most pronounced: up about 7.4 percent since mid-July. Traders are betting that a weak yen will support the aggressive policies put in place by Japan’s prime minister, Shinzo Abe, who has promised to revive the country’s slumbering economy.With Japan carrying the largest debt load in the world — 227 percent of its economic output — and with the country’s growth rate at barely 1 percent, the yen would seem to be ripe for the type of precipitous fall experienced by many emerging markets in recent years.Many traders point to the structural problems in Japan to bolster their prediction that the dollar will strengthen against the yen. More than ever though, underpinning their bullishness is the fact that the United States’ economy — younger, more flexible and with a better handle on its finances — is doing so much better than Japan’s.
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