What goes up when the dollar goes down

As the dollar falls, what can investors do both to protect their portfolios and to make money? Buy high-yielding European stocks, gold and commodities, and then holiday in New York.

The US currently imports far more goods and services than it exports - to the tune of about $660bn a year. That's clearly not sustainable in the long term. It has been possible until now largely because investors have believed that the US economy is a stable bet in the long run. They have, therefore, seen US government debt as a nice, easy and safe investment. In particular, Asian central banks have been underwriting the US deficit through massive purchases of US Treasury bonds. But as the banks and other investors become more nervous about the huge size of the US deficit, they start to see dollar-denominated assets, and the dollar itself, as less attractive. So they've been buying less and the dollar has been falling as a result. It recently touched an all-time low against the euro of $1.30. That said, don't count on the dollar just going down. Nothing moves in a straight line and there is every chance that the dollar is now due for a bounce. Long term, however, it seems pretty clear that the only way for the dollar is down.

That's good for America

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