Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How to Diversify Out Of U.S. Dollars With ETFs

Currencies / US Dollar Oct 14, 2010 - 08:50 AM GMT

By: Ron_Rowland


Best Financial Markets Analysis ArticleDo you pay attention to the currency markets? You’d better, if you want to survive and thrive in these crazy times.

I have to tell you I am NOT a currency expert. For deeper analysis I refer you to my Money and Markets colleague Bryan Rich. I do, however, know a trend when I see one — and right now the trend in the U.S. dollar is down against every major currency.

The U.S. Dollar Index measures the greenback’s change against a basket of other currencies. From its most recent peak on June 7, 2010 through October 12, the index fell 12.8 percent. Wow!

Investors have many ways to play the foreign exchange markets, including futures contracts. But I think exchange traded funds (ETFs) are ideal for most people. So today I’ll tell you about some that are capturing the dollar’s downturn.

First, let’s look at the big picture …

Obama and Bernanke Want a Cheaper Dollar!

If you’re a logical thinker, you might wonder what possible advantage could there be in wanting your own currency to lose value. Financial markets aren’t always logical. So let me give you a quick explanation on how foreign exchange rates work.

The key is trade. All international transactions have to be settled somehow. For instance, when you buy a Japanese car your dollars somehow must find their way back to Japan and converted into yen.

The U.S. imports more than it exports.
The U.S. imports more than it exports.

This wouldn’t be a problem if nations always imported and exported the same amounts. They don’t. We here in the United States buy more stuff from overseas than they buy from us. This is good in some ways, but it’s also a political problem. Why? The resulting domestic unemployment makes people want to vote against whoever is in power at the time.

Consequently, presidents from both parties have long wanted to cheapen the dollar. Ditto for the economists those same presidents appoint to the Federal Reserve Board. The reason for this is because a cheaper dollar makes U.S. goods more affordable to foreign buyers and increases our exports, thereby creating jobs and keeping voters happy.

Neither the president nor the Fed determines how much a dollar is worth. They can, however, do things that make a short-term difference. That’s what is happening right now:

  • Congress and the Obama Administration are racking up huge deficit spending, while …
  • Ben Bernanke’s Federal Reserve is planning a second round of “quantitative easing” to create more dollars out of thin air.

Both of these policies are negative for the greenback — and my guess is they aren’t going to change any time soon.

The Fed is driving the dollar down.
The Fed is driving the dollar down.

Meanwhile, other governments and central banks — in China, Japan, Europe and elsewhere — are doing the same things! To protect their home economies, they’re trying to devalue their own currencies against the dollar.

Who is most likely to get their way? For now, the U.S. is in the driver’s seat. Bottom line: The greenback could have a lot farther to go on the downside.

Ride the Dollar Down With Currency ETFs

The good news is you don’t have to just sit back and take the punishment as your dollars lose purchasing power. You can defend yourself — and maybe even turn a profit — by using ETFs to bet on the falling dollar.

More than thirty currency ETFs are now available to individual U.S. investors. With these you can implement strategies that were once available only to large, sophisticated institutions.

Of course, you have to know which ETFs to buy … you can’t just throw darts and expect to survive in today’s markets. But to give you an idea of what’s available here are a few ETFs that seem to have found some mojo lately:

  • ProShares Ultra Euro (ULE) is a leveraged fund that tries to deliver twice the change in the dollar/euro exchange rate. It has been flying the last few months.
  • CurrencyShares Swiss Franc (FXF), CurrencyShares Swedish Krona (FXS), and CurrencyShares Australian Dollar (FXA) each focus on a single foreign currency, and all three have posted double-digit returns since June. So has WisdomTree Dreyfus South African Rand (SZR).
  • PowerShares DB U.S. Dollar Bear (UDN) is a basket of foreign currencies in an ETF that tracks the inverse of U.S. Dollar Index I mentioned above. UDN is a less aggressive bet against the dollar because it reflects the performance of several different currencies instead of just one. This diversification is a good idea if you aren’t sure exactly which currencies will perform best against the dollar.

And here are the returns for the above from June 7, 2010 through Oct 12:

chart Diversify Out Of U.S. Dollars With ETFs

Take care if you buy any of these ETFs. They can be volatile from day to day, despite the dollar’s long-term trend. Check the trading volume and use a limit order.

Best wishes,


This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in