Play on Weak Dollar ETFs Gain Following

While the US greenback showed some strength last week, it ended on a sour note leading to more investors looking for exchange-traded funds that go up when the dollar goes down.

The dollar fell 0.2 per to $1.4870 against the euro, within a cent of the all-time low at $1.4966 it hit on Friday according to the WSJ. The dollar also fell 0.4 per cent to $2.0688 against the pound and 0.2 per cent to SFr1.1000 against the Swiss franc.

The dollar also fell sharply in Asian trade to a low of Y108.11 against the yen amid reports in the Japanese press that China would use its foreign exchange reserves to buy Japanese stocks through the China Investment Corporation, its sovereign wealth fund.

Investors have many ETF options to play the falling dollar. Rydex Investments offers CurrencyShares, an ETF grouping that tracks the price of 8 currencies. Each ETF buys foreign currency that is held in a bank in London and shares go up or down based on the foreign currency's value compared to the dollar. There is also the PowerShares DB G10 Currency Harvest (DBV) that tracks 10 currencies, going long on the top three currencies with the highest interest rates and going short on the "top" three currencies with the lowest interest rates. Crude but effective.

But watch out for the inevitable dollar rally. America's current account deficit has gone from 6.5% of GDP to 4.5% and our nation's trade deficit has also improved from 5% of GDP to 4% of GDP. If the Fed does not keep cutting interest rates, global markets may sit up and take notice.