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With the dollar in decline, it could pay to invest in a variety of international and foreign currency exchange traded funds (ETFs). There are several benefits abroad and reasons why the dollar continues to weaken, they include:
- The U.S. economy is growing slower than many other countries' economies (such as South Korea, Brazil, Japan, and Germany).
- U.S. interest rates are at the status quo while other countries' interest rates are declining, according to Carl Delfeld of ETF EXRAY.
- The U.S. housing market is kind of a mess and is not predicted to improve.
Investors are looking into international mutual funds, exchange traded funds (ETFs) and currencies. Bonds allow a way to invest in another country's currency and some can have attractive rates.
So when the dollar loses its value against foreign currencies investors actually benefit from this depreciation. Similarly, if the dollar appreciates against foreign currencies, it will be detrimental to your foreign investments.
There are numerous international ETFs that investors can choose from to take advantage of the weak dollar. It is a matter of finding the right one to fit in their portfolio and with their investment goals. Investors also can use currency ETFs in their portfolio. Although they are relatively new, the lineup continues to grow. Here are just a few currency ETFs and ETNs:
- PowerShares DB G10 Currency Harvest Fund (DBV): Seeks to track the Deutsche Bank G10 Currency Future Harvest Index by (1) entering into long futures contracts on the three G10 currencies associated with the highest interest rates, (2) entering into short futures contracts on the three G10 currencies associated with the lowest interest rates, and (3) collateralizing the futures contracts with United States 3-month Treasury bills.
- CurrencyShares British Pound Sterling Trust ETF (FXB): The CurrencyShares British Pound Sterling Trust is designed to track the price of the British Pound Sterling net of Trust expenses, which are expected to be paid from interest earned on the deposited British Pound Sterlings.
- CurrencyShares Euro Trust ETF (FXE): The CurrencyShares Euro Trust is designed to track the price of the euro net of Trust expenses, which are expected to be paid from interest earned on the deposited euros.
- CurrencyShares Canadian Dollar Trust ETF (FXC): The CurrencyShares Canadian Dollar Trust is designed to track the price of the Canadian Dollar net of Trust expenses, which are expected to be paid from interest earned on the deposited Canadian Dollars.
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