No matter how "American" you live your life, the declining dollar will have some affect on your daily purchases and investments, including exchange traded funds (ETFs). This week, the  dollar dropped to another all-time low against the euro and hit multi-year lows against other major currencies, reports Jeff D. Opdyke and Jane J. Kim for The Wall Street Journal. In turn, investors are putting their money into non-dollar-denominated assets.

Concerns about a slowing U.S. economy mixed with a sleepy trade deficit lead economists at Standard and Poor’s to conclude the fall will continue into 2009, staying flat until 2011. Imports will cost more as the dollar continues its downward spiral. Medical devices from Germany, machine tools from Italy — all these items would be much more expensive. Robert Reich for APM Marketplace says there’s a possibility that oil could be priced in euros and energy bills would be much higher if the dollar continued to fall. If China seriously revalues its currency, "Made in China" won’t be the cheap products sold in every large retailer in America.

In addition, Reich says that only the very rich, Wall Street investment houses and corporations with lots of cash can hedge against the dollar’s fall. However, the average Joe can get in on the action by investing in foreign currency or commodity-based ETFs.

Some currency and commodity ETFs and their performance year-to-date include:

  • CurrencyShares Euro Trust (FXE) – up 9.9%
  • CurrencyShares Japanese Yen Trust (FXY) – up 6.5% for the last three months, having launched in February
  • CurrencyShares Swiss Franc Trust (FXF) – up 5.2%
  • United States Oil (USO) – up 19.6%
  • iShares S&P GSCI Commodity-Indexed Trust ETF (GSG) – up 15.3%

Read the disclosure, as Tom Lydon is a board member of Rydex Investments.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.