Global economic uncertainty continues to intensify. Since May 2023, the U.S. dollar index has begun to experience a sustained period of shock and decline. Weak economic data further accelerated this downward trend. Market analysts pointed out that although the Federal Reserve currently maintains a relatively high interest rate level, this high interest rate environment is leading to the continuous accumulation of risks in the U.S. economy. Its inhibitory effect is becoming increasingly prominent and its scope of influence is gradually expanding, which further aggravates the market. concerns about the U.S. economic outlook. This trend of the U.S. dollar index reflects, to a certain extent, the deterioration of U.S. macroeconomic fundamentals.

Recently, the U.S. Dollar Index fell to its lowest point since December 2023. This trend is closely related to the Fed's monetary policy adjustments. As the market expects that the Federal Reserve may adjust interest rate policy at its September meeting, the trend of the US dollar has changed significantly. For investors, this volatility in currency markets presents potential investment opportunities in certain exchange-traded funds (ETFs). The following are several types of ETFs worthy of investors' attention amid the depreciation of the U.S. dollar.

Gold ETF

Gold has always been considered a safe-haven asset, and its price tends to rise when the U.S. dollar weakens. Recently, the price of gold has risen significantly, and this week it broke through the important psychological mark of $2,500 per ounce for the first time, setting a new historical record. This phenomenon not only reflects the market’s strong safe-haven demand for gold, but is also the result of global economic uncertainty, rising inflation expectations, heightened geopolitical tensions, and central banks’ actions to increase gold reserves. The following are several gold ETFs for investors’ reference:

• SPDR Gold Trust (GLD): As one of the most liquid gold ETFs on the market, GLD closely tracks the spot price of gold and is suitable for investors seeking direct gold investment.
• iShares Gold Trust (IAU): Similar to GLD, IAU provides another way to invest in gold and also tracks gold prices.
• VanEck Vectors Gold Mining ETF (GDX): Invests in gold mining companies. As the price of gold rises, the profitability of these companies increases, which may enhance the performance of GDX.

Safe haven currency ETFs

A weaker dollar has a direct impact on currency ETFs, especially those that track foreign currency exchange rates. Here are several safe-haven currency ETFs that could outperform when the U.S. dollar weakens:

• Invesco CurrencyShares Japanese Yen Trust (FXY): As the yen appreciates, FXY has performed strongly recently, providing an important investment option for investors who expect the yen to appreciate.
• Invesco CurrencyShares Euro Trust (FXE): When the dollar falls, the euro usually appreciates, and FXE may benefit from this.
• Invesco CurrencyShares Swiss Franc Trust (FXF): As the Swiss franc is a safe-haven currency, FXF may be positively affected when the U.S. dollar falls.

Currency Hedged ETFs

In a weaker dollar environment, unhedged international ETFs may perform better as other currencies appreciate. Here are several currency-hedged ETFs that may be attractive in the current market environment:

• WisdomTree European Hedge Equity Fund (HEDJ): Focuses on the European market and hedges currency risks. HEDJ may perform better when the dollar depreciates.
• WisdomTree Japan Hedge Equity Fund (DXJ): Similar to HEDJ, DXJ invests in the Japanese market and hedges currency risk and may outperform hedge funds when the dollar weakens.

ETFs directly tied to the U.S. dollar

The direct movement of the U.S. dollar has a significant impact on some ETFs that focus on the U.S. dollar index or U.S. dollar movements. Here are several ETFs directly tied to the U.S. dollar, whose performance is closely tied to U.S. dollar movements:

• Invesco DB U.S. Dollar Index Bullish Fund (UUP): UUP tracks the U.S. dollar index and reflects the strength and weakness of the U.S. dollar. When the U.S. dollar depreciates, the performance of UUP may be affected and is an important reference for judging the future trend of the U.S. dollar.
• Invesco DB U.S. Dollar Index Bearish Fund (UDN): Contrary to UUP, UDN focuses on the expectation of U.S. dollar depreciation, may perform better when the U.S. dollar weakens, and is an effective tool to hedge the risk of U.S. dollar depreciation.

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