3 Ways to Invest Money in a Strong U.S. Dollar

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Joined: Sun Jul 05, 2020

3 Ways to Invest Money in a Strong U.S. Dollar

Post by currencyinvestor19 »

The U.S. Fed will likely raise interest rates later this year, which could cause the U.S. Dollar to rise even more. This means that businesses exposed to the European and Asian markets will record big currency impacts on the bottom line. However, there are several ways shrewd investors can profit from a rising Dollar.

"All-American" stocks

A simple way is to buy more "All-American" stocks which are primarily dependent on the U.S. economy. 107 of the companies in the S&P 500 generate over 85% of their revenue from the U.S., according to Fact Set Research.

These companies won't be affected by the strong U.S. Dollar, but they face challenges of their own. Comcast must deal with cord cutters who are ditching cable plans in favor of streaming-only solutions. Altria must deal with declining smoking rates and rising excise taxes across America. Home Depot's growth depends heavily on the health of the housing market.

U.S. Dollar ETFs

Another way to invest in the rising Dollar is to simply buy an exchange-traded fund like the PowerShares DB U.S. Dollar Bullish ETF (NYSEMKT:UUP). This ETF establishes positions in futures contracts to track the change of the U.S. Dollar over time.

In other words, it's an easy way to profit if the U.S. Dollar keeps rising without trading currencies directly. So far, the ETF has done a fairly good job at keeping track of the dollar index. Over the past 12 months, the U.S. Dollar index rallied 21% and the PowerShares ETF climbed 19%.

Hedged-currency ETFs

Another interesting idea is to invest in QE-stimulated overseas markets like Japan. Although the Japanese economy is being boosted by QE, it's risky to invest directly in Japanese companies, since the strong U.S. Dollar reduces those profits.

That's where hedged-currency ETFs -- which reduce yen currency exposure by measuring gains in U.S. Dollars -- come into play. One such ETF for the Japanese market is the WisdomTree Japan Hedged Equity Fund (NYSEMKT:DXJ), which has rallied 26% over the past 12 months.
Investors can also use hedged-currency ETFs to invest in the European market. The WisdomTree Europe Hedged Equity Fund (NYSEMKT:HEDJ), for example, has rallied 19% over the past 12 months.

All-American stocks, U.S. dollar ETFs, and hedged-currency ETFs are three solid ways to invest in the rising dollar with U.S. dollars. Investors shouldn't overreact and dump all companies with overseas exposure or load up on ETFs. Nonetheless, investors should recognize these investment opportunities and know how to profit from them.
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Re: 3 Ways to Invest Money in a Strong U.S. Dollar

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