Weak Dollar, Strong Signal: ETFs To Watch As US Policy Risk Grows – WisdomTree Emerging Currency Strategy Fund (ARCA:CEW), Invesco DB Precious Metals Fund (ARCA:DBP), abrdn Physical Precious Metals Basket Shares ETF (ARCA:GLTR), Invesco DB USD Index Bearish ETF (ARCA:UDN)

Investors aren’t waiting for the U.S. dollar to find a bottom. They’re already trading on the decline for a while now. Whether it’s bearish dollar funds, gold ETFs, or emerging market ETFs, market positioning is indicating that the weakness in the dollar is being viewed as a structural issue, not a short-term rate play.

Anti-Dollar ETFs Take Center Stage

One of the first groups of funds to take center stage are those that profit from a falling dollar. The Invesco DB U.S. Dollar Index Bearish Fund (NYSE:UDN), which increases in value as the dollar falls against a portfolio of major world currencies, is up over 2.3% in the past five days and 10% in the past year, as investors hedge against a falling dollar.

The WisdomTree Emerging Currency Strategy Fund (NYSE:CEW), which provides active exposure to emerging market currencies that historically perform well when investors shift their portfolios out of dollar-denominated assets, is another example of a fund that profits from a falling dollar. On Jan 26, this fund saw $2 million dollars in inflows, according to Etfdb.com.

These ETFs are becoming increasingly popular not only as a trade, but as a hedge against portfolio risk due to growing U.S. policy uncertainty.

Precious Metals ETFs Retain Safe-Haven Status

Precious metals ETFs have also continued to be beneficiaries of a weaker dollar. Lower real yields and currency weakness are generally positive drivers of gold and silver prices, making precious metals a natural hedge during times of political and monetary turmoil.