The U.S. dollar is steadily dropping. Yet, value can be found in certain areas of the market and exchange trade funds (ETFs). Who wins and who loses when the dollar drops off?
The dollar’s value relative to other world currencies has depreciated by a third since 2002, according to the Wall Street Pit. A weaker dollar is asset class supportive, stimulates exports and improves the rate of economic growth; however, a large currency depreciation may lead to inflationary pressures, damage to export industries in the long-term and reduces incentives for export industries to become more efficient. (Unemployment numbers strengthen the dollar).
The ultimate winners of a depreciating greenback include investors, nations with rich resources, American industry and Chinese industry. The losers include China’s Central Bank, other foreign industries and other Central Banks.
ETFs that could be potentially positively impacted include:
- SPDR Gold Shares (NYSEArca: GLD)
- iShares MSCI Brazil (NYSEArca: EWZ)
- Market Vectors Russia (NYSEArca: RSX)
- WisdomTree Dreyfus Japanese Yen (NYSEArca: JYF)
- PowerShares DB U.S. Dollar Bearish (NYSEArca: UDN)
ETFs that could be negatively impacted include:
- PowerShares DB U.S. Dollar Index Bullish (NYSEArca: UUP)
- iShares S&P Global Financials (NYSEArca: IXG)