The U.S. dollar is sagging. Investors can capitalize on its weakness with the Invesco DB US Dollar Index Bearish Fund (UDN).

UDN seeks to track the changes, whether positive or negative, in the level of the Deutsche Bank Short US Dollar Index Futures Index. The index reflects the changes in market value over time, whether positive or negative, of a short position in the DX Contract which expires during the months of March, June, September, and December.

The fund seeks to track the index by establishing short positions in DX Contracts. DX Contracts are linked to the six underlying, or index, currencies of the U.S. Dollar Index (USDX®), or the USDX®. The index currencies are Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona, and Swiss Franc.

“The U.S. dollar lost ground to its developed-market peers in November, and currency strategists expect further weakness into 2021 as the Biden administration moves into the White House and coronavirus vaccines are developed,” reports S&P Global Market Intelligence.All nine of the dollar’s peers in the so-called G10 gained on the dollar in November, led by the Norwegian krone, which gained 7.09% on the dollar, and the New Zealand dollar, which gained 5.93%.”

The Dollar’s Dilemma is UDN’s Utopia

Data confirm that the Dollar Index is in correction territory, which if realized, could hasten more declines. Additionally, the upcoming presidential election could have profound consequences for the greenback.

Some market observers are growing bearish on the dollar, meaning it could be time to look at UDN, which is higher by 3% over the past month.

UDN YTD Performance

“The dollar’s latest underperformance in November was largely a function of a “market-friendly” U.S. election outcome, in which Democrat Joe Biden won the presidency but Republicans appear likely to hold on to the Senate, as well as positive news on coronavirus vaccine development from Pfizer Inc., Moderna Inc. and others,” according to S&P Global.

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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.