The U.S. dollar is regaining strength against major currencies such as the euro, yen and British pound. Various exchange traded funds allow investors to play the latest rise of the greenback.
“The fact is that the US dollar is the reserve currency of the world and immediate steps must be taken to mitigate the risk of the possible substantial decline of it. If the fiscal cliff deteriorates further or tumbles substantially, the repercussions for the rest of the world will be extremely serious,” Perun Naidoo, risk management expert, said in a recent report.
The U.S. dollar index is up 3% so far in 2013, a big jump in three months. However, some of the “rise” in value can be attributed to the weakness seen in the euro, Japanese yen and British pound. Some events that are intervening in the currency markets are the unsettled debt issues in the Eurozone, compounded with the latest Cyprus crisis. The change in Japan’s economic stimulus is another factor that is weakening the yen, reports Jonathan Burton for MarketWatch.
For those bullish on the continued rise in the U.S. dollar, the PowerShares DB US Dollar Index Bullish Fund (NYSEArca:UUP) . This portfolio pits the greenback against six foreign currencies: the euro; British pound; yen; Canadian dollar; Swiss franc and Swedish krona.The ETF has seen larger than normal trading volume due to the recent investor demand for U.S. dollars as investors have exited the euro, reports Zacks. [Some ETFs for Rising Interest Rates]
A different angle on gaining exposure to a rising greenback is to invest in U.S. large-cap companies. The larger U.S. companies may have a tougher time in the global marketplace, however, a strong U.S. consumer is enough for domestic companies to profit. The consumer staples sector is an indirect play on the greenback. The Vanguard Consumer Staples (NYSEArca: VDC) or the Vanguard Consumer Discretionary (NYSEArca: VCR) both benefit from the U.S. dollar’s strength.