How To Bet Against The U.S. Dollar

It is easier than you think. There is an exchange traded fund, PowerShares DB US Dollar Index Bearish (UDN), that shorts futures contracts on the U.S. dollar versus other currencies. As the Treasury continues to borrow money from China and lend it to U.S. banks, the long term outlook for our currency is bleak, to put it nicely.

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One Thought on “How To Bet Against The U.S. Dollar

  1. Hi there

    I think long term investors should avoid using short ETFs as investment vehicles to take positions.

    Short ETFs returns generally are calculated on a daily basis and the underlying portfolio is reweighted daily. In a high volatility environment this can totally distort returns to investors, essentially one is short vol in a rising vol environment – not a great proposition.

    See
    http://www.thestreet.com/p/rmoney/etf/10454525.html
    For a basic run down on the mechanics of this.

    In addition, one also needs to be aware of credit risk that these funds are running, particularly if their assets are deposited/in custody with one financial institution.
    See http://alephblog.com/2009/01/22/hidden-credit-risk-in-currency-funds/
    as an example.

    This is very similar to the problems with ETNs we saw after Lehman ran into problems.

    I was wondering if you had explored other alternatives to betting against a dollar devaluation over the long term?

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