Capitalize on the Declining Dollar

A reader asks:

Hi David,

How does an average guy like me with an Ameritrade account take advantage of the Canadian Dollar rising (13% since September). Are there any currency products that are traded? Also, can I short the dollar at the same time?

Thanks,

Mark D

Heya Mark,

There is an exchange traded fund that will let you play the rise of the Canadian Dollar relative to the US Currency. I wouldn't do it with my own money at this point. I think the fall in the U.S. Dollar is getting overdone. That is a long term view and doesn't mean things can't get worse for the Greenback in the next few months. I started buying the Euro at $1.06 in the early this decade and kept buying as it fell another 20% in my face for two years. Currency mispricings take a long time to work out.

So to answer your question, there is an exchange traded fund called Currency Shares Canadian Dollar (FXC) ($107.25). But playing currencies is playing economics.

My way to play any further decline in the dollar is also to pick a currency and stock market region I still feel is undervalued: Asia. I'm playing with the ETF Vanguard Asia (VPL) ($74.00).

Best of luck with your currency bets. But be careful.

Disclosure: I own VPL. I do not own FXC. I had about 500 Canadian dollars in a drawer at home but I sold them last month to a Canadian friend. I like Canada, I took the photo above while cycling in Quebec last summer. I like their beer, they way they mostly embrace a bi-lingual culture, their skiing, and their irreverent political attitudes. They said no to Bush's invasion of Iraq; what's not to like. Still I am who I am and I would rather be American.