What ETFs to Invest Now that the US Dollar is Weak
The US greenback continues to perform anaemically, and financial experts are looking at bleaker days ahead. There are several factors for the decline, such as the COVID-19 pandemic, the US economic slowdown, and the glut in the currency supply. There is also the fact that the euro has recovered from the pandemic while the US continues to grapple with its devastating aftereffects, particularly on the consumption and production.
However, the US Congress seems hell-bent on arresting the slide by passing a stimulus bill that legislators hoped would fuel the recovery of the greenback. But financial experts are pessimistic that the US dollar can gain in the short term due to the widening budget deficit. They are even comparing the current environment to the year 2011, when the currency dropped to record lows.
With that said, if you are investing in ETFS, the weakening US greenback points to some opportunities for investment. Here are just some of the ETFs you should be looking at:
- Non-Currency-Hedged Europe ETFs — Non-currency hedged ETFs use the same allocation as currency-hedged ETFs. One significant development was the announcement of the European Commission that it will borrow 750 billion euros to be distributed to the EU countries. It means that some ETFs would gain due to the overall optimism caused by the stimulus package. Both the Vanguard FTSE Europe ETF VGK and iShares MSCI Europe Small-Cap ETF have made strong headways, and their upward momentum is not going to slow down soon.
- Large-Cap ETFs — Large-cap ETFs refer to investments in companies with assets upwards of $10 billion. Generally, they are less volatile and offer a more stable dividend stream compared to smaller stocks. However, they perform well when the US dollar is weak. For instance, SPDR S&P 500 ETF Trust has been gaining since July.
- Inverse Dollar — Just like the name suggests, you are betting against the dollar. Also called, the short US dollar ETF, you gain exposure by using swaps and futures contracts. You will earn the inverse rate of the daily or monthly yield of the greenback. For starters, you can invest in Invesco DB US Dollar Index Bearish Fund, ProShares UltraShort Euro, or ProShares UltraShort Australian Dollar.
- Metal ETFs — ETF is an affordable entry option for investing in gold. Historically, when the US dollar weakens, the gold prices increase. Both SPDR Gold MiniShares Trust and Aberdeen Standard Physical Gold Shares ETF will monitor the spot price of the yellow metal, less the expenses. Meanwhile, Invesco DB Precious Metals Fund functions like a commodity pool, where it combines the assets to invest in futures. Apart from gold, you can also invest in silver, which is steadily rising since the first half of 2020. Typically, metal ETFs perform well under a weak US currency environment because they are priced against the greenback.
Those are just some of the ETFS you can consider under the anaemic showing of the US greenback. Financial experts are betting against the US dollar recovering by the end of the year, with no end in sight for the coronavirus. You can get sound advice from brokers on how to start investing in the Australian ETF market. Unlike with other stocks, you do not need a minimum investment amount to participate in the market. You only need to pay the price of one share.