Foreign Stocks, ETFs and the Descent of the Dollar
The shrinking dollar makes moving from the U.S. to many other countries expensive, as would-be expats know. Investing in foreign markets, however, produced highly impressive gains during most of 2007, but some of those gains result from how much the dollar has lost against foreign currencies.
For example, the greenback lost 9.6% against the Euro and 16.7% against the Brazilian real in 2007. Other currencies that have made investments look good are those of Canada and Australia. If the U.S. dollar becomes stronger, investments in ETFs or stocks of these countries will decrease in value. But is the dollar apt to show strength any time soon?
If you think the dollar is about to make a comeback, you might want to invest in counties where the currencies don’t move as much against the dollar. Some currencies showing stability against the dollar include the Chinese Yuan, the Hong Kong dollar and the Mexican peso.
Many experts currently expect the Euro to continue its gain against the dollar. From 2001 through 2007, the greenback has declined at a compound rate of over 7% per year against the Euro. There’s an ETF that allows investors to profit as the decline persists, Rydex Euro Currency Trust or FXE. For the year ending January 31, 2008, it had increased in value 17.9%.
As the dollar dips, commodities rise. If you’d like to participate in profits in grains such as wheat, soybeans, corn, etc., then consider PowerSharesAgriculture Fund or DBA, up 44.77% for the year ending last January 31.
Whatever the investment, do your own research.