The U.S. dollar and the exchange traded fund (ETF) that tracks it are both showing signs of wear. If the dollar is depreciating, then there should be something somewhere that is capitalizing on the currency’s weakness.

  • A deteriorating U.S. dollar helps investments in developed and emerging markets, as well as export-oriented U.S. firms, writes Jonathan Burton for MarketWatch. Or, an investor can forgo the indirect routes and invest in pure currency funds.
  • Commodity-based economies also tend to rally when the dollar weakens.
  • Investment returns garnered abroad are worth more in dollars if the dollar is weak — compliments of exchange rates.
  • U.S. companies with overseas business will also earn revenue in the local currency and would be more valuable when traded into dollars.
  • U.S. tech and energy firms will also stand to gain on a depreciating dollar since, on average, 50% of their revenues comes from overseas.

Why are currency traders bearish about the dollar? For one, China, a major holder of U.S. debt, and Russia are beginning to voice the idea of a world economy with the dollar playing a lesser role. Another reason is U.S. government’s copious stimulus plans and when economies recover, investors would start to take more risk, strengthen commodity prices, and keep the dollar weak.

Investors may consider international exposure or even straight foreign currency exposure without the equity exposure as a play on the dollar. Watch the trend lines to see where things could be headed.

  • PowerShares DB U.S. Dollar Bearish (UDN): up 3.2% year-to-date


  • PowerShares DB U.S. Dollar Bullish (UUP): down 4.2% year-to-date


For more information on the dollar, visit our U.S. dollar category. Or if you’re more interested in other currencies, take a look at our ETF currency guide.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. 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.