7 Ways to Invest With a Weakening U.S. Dollar

The greenback’s slide may endure.

After several years of strong gains and a peppy start to 2020, the U.S. dollar is now weakening for a few reasons. The Federal Reserve and other global central banks cut interest rates and implemented other measures to stave off the worst economic effects caused by the pandemic. The Fed’s rate cuts minimized the value differences in interest rates between the U.S. and other countries, and the fiscal stimulus helped raise debt levels. That led to increased investor appetite for riskier investments. Brad Cushman, managing director at Morgan Stanley Private Wealth Management, says his firm’s outlook is for a weaker dollar going forward — and that benefits certain investments more than others. Here are seven ways to invest in a falling dollar.

U.S. multinational companies

U.S. companies that export products or have a significant global footprint with foreign sales can benefit from a weaker dollar as these companies translate those overseas earnings and sales back into U.S. dollars. Companies that do business in currencies like the euro, the British pound or any other currencies that are strengthening versus the U.S. and then repatriate those sales into weaker U.S. dollars benefit from the exchange rate as they report their earnings, says Bill Northey, senior investment director, U.S. Bank Wealth Management. Energy companies used to be the traditional firms benefiting from this foreign-currency exchange, but now technology companies such as Apple (ticker: AAPL) and Microsoft Corp. (MSFT) are among the modern picks. “As a U.S.-based investor, you also benefit from that weakening U.S. currency,” he says.


Most commodities are priced in U.S. dollars. So generally, when the U.S. dollar falls, the price of a commodity rises because it will take more of those dollars to buy a bushel of wheat or a pound of copper. Sal Bruno, chief investment officer of IndexIQ, says hard-asset commodities such as copper, aluminum or natural gas that have industrial uses also benefit from the economic cycle. To add exposure to your portfolio, investors can choose broad-based commodity exchange-traded funds such as the Invesco DB Commodity Index Tracking Fund (DBC), or they can buy individual stocks of commodity-producing companies such as mining company Freeport McMoRan (FCX).


Like for most commodities, the recent dollar weakness has benefited gold. Kristina Hooper, chief global market strategist at Invesco, says gold should continue to perform well as the greenback sinks. Gold is also unique among commodities because investors view it as a more stable store of value, she adds, and that can drive people to buy it. There are several ways investors can own gold, including physical gold coins and bars or through several gold-linked ETFs. One of the cheapest options is the GraniteShares Gold Trust (BAR), which has an annual expense ratio of 0.17%, or $17 for every $10,000 invested. Investors can also buy gold-mining stocks. The First Eagle Gold Fund (SGGDX), a mutual fund, invests in both bullion and mining stocks.


Teddy Fusaro, chief operating officer at Bitwise Asset Management, says when it comes to a falling dollar and cryptocurrencies, he focuses on Bitcoin — the best-known of all digital currencies. “I think the right way to think about Bitcoin is as the world’s first and digital commodity,” he says, referring to it as a digital gold. And like gold, Bitcoin is also denominated in U.S. dollars, which helps its value rise when the buck falls. Fusaro says that the most widely cited current use case for Bitcoin is as a store of value outside of the broader fiat currency system, much like gold.

Developed-market international stocks

Foreign companies operate in their local currencies, so U.S. dollar-based investors benefit from a weaker dollar because their international stock holdings are worth more once converted to greenbacks. Most U.S. investors are generally underweight international equities in their portfolio, Cushman says, and foreign stocks often have a low correlation with domestic stocks — so they can offer diversification. Plus, they also tend to not be dominated by technology companies, unlike U.S. indexes. After several years of underperformance, foreign stock valuations are cheaper, too, based on price-to-earnings multiples.

Emerging-market stocks

Investors with a long investing horizon or a higher risk appetite might consider adding emerging-market equities. Just as developed-market international stocks are impacted by both an individual company’s performance and the strength or weakness of their particular currency against the U.S. dollar, so are emerging-market companies. Bruno points out that when the U.S. dollar is weaker, investors can sometimes get a double benefit because many companies in emerging markets are also commodity producers. “We like commodity equities a lot in this type of environment,” he says. One way to play this is through the SPDR S&P Global Natural Resources ETF (GNR), which tracks an index of companies in natural resources and/or commodity businesses. Roughly 70% of its firms are based outside of the U.S., in markets like India and Brazil.

Emerging-market debt

For fixed-income investors who are comfortable with the potential of higher risk for a higher yield, emerging-market debt offers another way to benefit from a weakening dollar. Hooper says a subset of emerging-market bonds — those that are U.S. dollar-denominated — may do particularly well. “When you have a drop in the U.S. dollar, it makes it easier to service that debt if the bonds are denominated in the dollar,” she says.
“(Emerging-market) bonds in general benefit from that same currency translation that you get from owning international stocks.” For interested investors, one fund to consider is the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB), with top debt holdings from countries such as Russia and the Philippines.

Seven ways to invest in a weaker dollar:

— U.S. multinational companies.

— Commodities.

— Gold.

— Cryptocurrencies.

— Developed market international stocks.

— Emerging-market stocks.

— Emerging-market debt.

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