The U.S. dollar has strengthened against currency rivals in a rally since the beginning of September. This turnaround has some investors looking for exchange traded funds that profit from a rising dollar.
Jason Raznick at Benzinga.com notes the easiest way to play a stronger dollar with ETFs is PowerShares DB US Dollar Bullish Fund (NYSEArca: UUP). The ETF tracks the dollar’s movements against a weighed currency basket consisting of the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. [Dollar ETF Staging a Comeback?]
However, there are other ETFs that investors can utilize to position for a stronger greenback, Raznick explains.
For instance, Taiwanese stocks, as represented by the iShares MSCI Taiwan Index Fund (NYSEArca: EWT), will benefit from a stronger U.S. dollar. According to Credit Suisse calculations, for every 1% depreciation in the Taiwanese dollar, local companies gain an additional 2.3% profit. Nevertheless, investors still remain wary of risks in the equities market, particularly in emerging economies.
Global X Mexico Small-Cap ETF (NYSEArca: MEXS) may also benefit as Mexico’s exports become more competitive on the stronger U.S. dollar, he writes.
As the Eurozone euro currency continues to weaken, major name French name brands will become cheaper to U.S. buyers. The iShares MSCI France Index Fund (NYSEArca: EWQ) holds a 16% weighting in consumer discretionary companies.
Foreign car manufacturers should also benefit from a stronger dollar. First Trust Nasdaq Global Auto Index Fund (NYSEArca: CARZ) has a large weighting in big foreign names like Toyota (NYSE: TM), Honda (NYSE: HMC), Daimler and BMW.
Adding to the foreign exporter theme, the iShares S&P Global Consumer Discretionary Index Fund (NYSEArca: RXI) holds many foreign discretionary goods producers that should see export revenues rise as an Americans are able to buy more stuff with an appreciating dollar, Raznick writes.
PowerShares DB US Dollar Bullish Fund
For more information on the U.S. dollar, visit our U.S. dollar category.
Max Chen contributed to this article.