The Dollar Bearish ETF A Good Bet (UDN)

Despite the fact that its sees the global economic recovery gaining strength, the IMF released a dour report on the size of the fiscal deficits and stability of the financial markets. The IMF warned “Among the advanced economies, the United States, in particular, needs to adopt measures that would allow it to meet its fiscal commitments.” This warning comes on the back of Bill Gross's cautionary suggestions about U.S. treasuries offering little to no value. Fears of a possible debt default and other nation's desire to diversify away from the greenback will ultimately seal the dollars fate. The nation's unfunded liabilities will cause the dollar to fall lower. The U.S. federal deficit currently stands at $1.4 trillion and is expected to reach $1.5 trillion in the current fiscal year.

With the long term trend of the dollar heading in the downward position, investors may want to add some protection. The PowerShares DB US Dollar Index Bearish (NYSE: UDN) has rallied as the greenback has fallen nearly 14% in the last 10 months. The fund follows an index that designed to replicate the performance of being short the US Dollar against the Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc. Investors can think of the ETF as an insurance policy and will protect U.S. investments from the continued decline of the dollar. In addition, currency movements are historically not correlated to stocks. Expenses for the fund run 0.75% annually.