Is there an ETF that shorts the US dollar?
Inverse/Short U.S. Dollar ETFs are funds that seek to provide the opposite daily or monthly return of the U.S. dollar (USD). The funds use futures contracts and swaps to gain exposure.
- Choose the currency you want to trade against the US dollar.
- Open a CFD trading account, or try our demo account.
- Select 'buy' (if USD is the quote currency) or 'sell' (if USD is the base currency) in the deal ticket and choose your position size.
- Open and monitor your position.
Long U.S. Dollar ETFs seek to profit from the rising U.S. dollar (USD) against a basket of other developed-market international currencies. These include the yen, loonie, aussie, pound, franc and euro.
An inverse ETF is a type of exchange-traded fund, or ETF, that bets against the expected daily performance of an asset or market index. During periods of volatility, day traders may use these “short” or “bear” ETFs as a way to reduce their exposure to or potentially even profit from downward market moves.
A weaker dollar, however, can be good for exporters, making their products relatively less expensive for buyers abroad. Investors can also try to profit from a falling dollar by owning foreign-currency ETFs or investing in U.S. exporting companies.
How does shorting the US dollar work? Because all forex is traded in pairs, shorting the US dollar works by selling it against another currency in the hopes that its value will go down. In other words, you're making a bet that the USD will weaken against another currency.
Currency futures allow investors to lock in an exchange rate for a future date, while currency options give investors the right but not the obligation to buy or sell a currency at a specific price. Historically, investors have hedged against the USD by putting their money into gold.
For instance, the Invesco DB U.S. Dollar Index Bullish Fund (UUP) is an ETF that tracks the changes in value of the US dollar via USDX future contracts.
An ETF that is leveraged 3x seeks to return three times the return of the index or other benchmark that it tracks. A 3x S&P 500 index ETF, for instance, would return +3% if the S&P rose by 1%.
Why is ETF not a good investment?
The single biggest risk in ETFs is market risk. Like a mutual fund or a closed-end fund, ETFs are only an investment vehicle—a wrapper for their underlying investment. So if you buy an S&P 500 ETF and the S&P 500 goes down 50%, nothing about how cheap, tax efficient, or transparent an ETF is will help you.
Inverse or short ETFs are risky and may not be the best strategy to hold in the long term. This is because inverse ETFs track the daily performance of financial securities and investing in these with a long-term view is likely not to yield similar results as in the short term.
During economic crises, investors often flock to gold and silver as a safe-haven investment. This increased demand can drive up their prices, making them valuable assets in a collapsing dollar scenario. Additionally, gold and silver have historically acted as a hedge against inflation.
If the dollar collapses, your 401(k) would lose a significant amount of value, possibly even becoming worthless. Inflation would result if the dollar collapsed, decreasing the real value of the dollar when compared to other global currencies, which in effect would reduce the value of your 401(k).
Protecting yourself from a potential dollar collapse requires thorough planning and diversification. By spreading your investments across various assets like gold, Bitcoin, federal bond funds, collectibles, antiques, paintings, and real estate, you can minimize risk and preserve value.
The weakest currency in the world is the Iranian rial (IRR). The USD to IRR operational rate of exchange is 371,992, meaning that one U.S. dollar equals 371,922 Iranian rials.
A weakening dollar means that imports become more expensive, but it also means that exports are more attractive to consumers in other countries outside the U.S. Conversely a strengthening dollar is bad for exports, but good for imports.
The $2.50 Rule
It basically means if you short a stock trading under $1, it doesn't matter how much each share is — you still have to put up $2.50 per share of buying power. That can eat up a lot of capital. I mean, why would a short seller put up $2.50 in buying power to short a 40-cent stock down to what …
If the Dollar collapses what will happen to my stock? If a major currency collapses, stock investors will be much better protected. Because hyperinflation could completely wipe out the value of your money. But if you're holding a stock, you own a share of a company.
A US dollar collapse would likely cause the price of gold to rise. Rising inflation, a common result of a falling dollar, would increase gold prices. However, the rising demand for gold would likely increase the amount of gold mined in the U.S. This could offset the rising price caused by inflation.
What assets do best in inflation?
Several asset classes perform well in inflationary environments. Tangible assets, like real estate and commodities, have historically been seen as inflation hedges. Some specialized securities can maintain a portfolio's buying power, including certain sector stocks, inflation-indexed bonds, and securitized debt.
| Symbol | Name | 5-Year Return |
|---|---|---|
| USD | ProShares Ultra Semiconductors | 52.17% |
| FNGO | MicroSectors FANG+ Index 2X Leveraged ETNs | 49.28% |
| TECL | Direxion Daily Technology Bull 3X Shares | 45.82% |
| TQQQ | ProShares UltraPro QQQ | 36.25% |
- The Best Volatility ETFs of February 2024.
- Simplify Volatility Premium ETF (SVOL)
- Short VIX Short-Term Futures ETF (SVXY)
- iPath S&P 500 VIX Mid-Term Futures ETN (VXZ)
- iPath S&P 500 VIX Short-Term Futures ETN (VXX)
- iShares MSCI EAFE Min Vol Factor ETF (EFAV)
- SPDR SSGA US Small Cap Low Volatility Index ETF (SMLV)
Invest in More Domestically Focused Sectors
For example, utilities and real estate are good options as most of their profits are generated domestically. Manufacturing businesses that receive their raw materials from foreign markets can also benefit from a rising dollar.
Yes, if you're using leverage or trading on margin, you can lose more than you invest in ETFs. Otherwise, in a standard investment without leverage, your losses are limited to the amount you've invested.
