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3 ETFs to Bet on a Weakening Dollar

The U.S. dollar suffered a sharp decline last week on concerns over looming interest rate hikes. While the greenback eventually found its footing, its overall weakness is expected to persist. Therefore, we think ETFs SPDR Gold Shares (GLD), iShares MSCI Emerging Markets (EEM), iShares Silver Trust (SLV) could be ideal bets now because they tend to do well when dollar declines. Read on.

The greenback snapped its three-day streak of declines with the United States dollar index rising 0.4% to 95.17 last Friday. However, the dollar finished the week down about 0.6%, registering its worst week since early September. According to Scotiabank’s foreign exchange strategists, the dollar came under pressure last week because investors seemed to believe that the greenback had peaked. The concerns over the Federal Reserve’s impending interest rate hikes also contributed to the decline.

Prices of precious metals are largely tied to the U.S. dollar. Precious metal prices tend to rise when the dollar weakens. In addition, money managers are advising investors to put money into emerging market stocks and gold. Historically, emerging markets’ values have an inverse relationship with the U.S. dollar.

Because the overall weakness in U.S. dollar is expected to persist, we think SPDR Gold Shares (GLD), iShares MSCI Emerging Markets ETF (EEM), and iShares Silver Trust (SLV) could be ideal bets now.

SPDR Gold Shares (GLD)

GLD as an investment aims to reflect the performance of gold bullion, less the trust’s expense. The trust can be used as a short-term position to hedge against equity market volatility and inflation.

Tracking the LBMA Gold Price PM ($/ozt) index, as of January 14, GLD had $57.21 billion in assets under management. The fund has a 0.40% gross expense ratio, which is lower than the 0.44% category average. Over the past three years, its fund flows have been $9.07 billion. GLD has a $17.26 NAV.

The ETF has gained 2.7% over the past three months and 1% over the past month to close the last trading session at $169.39. 

iShares MSCI Emerging Markets ETF (EEM)

EEM offers exposure to the stock markets of emerging economies. The fund generally invests at least 80% of its assets in the component securities of its underlying index and in investments that have substantially identical economic characteristics to the component securities of the underlying index. The ETF is useful as a short-term trade for increasing exposure to risky assets.

Tracking the MSCI Emerging Markets Index, EEM had $29.68 billion in net assets of the fund as of January 14. It has a NAV of $50.12. The ETF has an expense ratio of 0.68%, and its fund flows over the past month were $131.26 million. The fund’s top holdings include Taiwan Semiconductor Manufacturing Company Limited (TSM), with a 7.45% weighting, Tencent Holdings Limited (TCEHY), with a 4.35% weighting, and Samsung Electronics Co., Ltd, with a 3.86% weighting.

EEM’s $0.76 annual dividend yields 1.47% on its current share price. The ETF has gained 2.2% over the past month to close the last trading session at $49.22. 

iShares Silver Trust (SLV)

SLV aims to reflect the performance of the price of silver before payment of the trust expenses and liabilities. It is not actively managed. In addition, the trust does not engage in any activities to profit or reduce losses caused by silver price changes. The fund is appropriate for short-term traders.

SLV tracks the LBMA Silver Price ($/ozt) and has an expense ratio of 0.50% versus the 0.44% category average. With $12.21 billion in net assets as of January 14, SLV’s fund flows were $3.72 billion over the past three years. SLV has a 1.16 beta.

The ETF has gained 4.9% over the past month to close the last trading session at $21.69.


GLD shares were trading at $171.87 per share on Wednesday morning, up $2.48 (+1.46%). Year-to-date, GLD has gained 0.53%, versus a -4.13% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.


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