The US dollar is currently experiencing a high dose of intense agony. The American currency is constantly being challenged by global competitors, who, in turn, are out for blood, wanting to snatch away the USD’s global hegemony. The US dollar is currently derailed by constant de-dollarization efforts, with Trump’s sanctions and tariffs adding more pressure on the USD. In short, the US dollar is currently at its weakest, worrying its investors to the core. In the middle of this spiral, analysts are still curating ways to profit from a weak USD, stating how the dollar can still deliver lucrative returns if one knows how to make the most out of the current USD devaluation and downfall.
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Analyst Weigh In: How Can You Profit From a Weak US Dollar?
1. Own Non-US Assets, Especially European Financials and Telecoms
According to Marko Papic, chief strategist at BCA Research, owning non-US assets, especially European financials and telecoms, could be the best way to make the most out of the weak USD. Per a Bloomberg report, Papic suggests that investing in China and Europe, or regions with a massive upside, could help investors extract the most profits out of the current situation.
“My favorite region is Europe. Particularly financials and telecoms, where I would expect to see a lot of consolidation and M&A. Anything that is focused on domestic consumption in Europe should do well. Because European economies will respond to the shrinking of the US twin deficits by stimulating.” Papic told Bloomberg
2. Opportunities in Emerging Debt, Currency Activities
Another surefire way of making more profits during a weak USD phase is through investing in equities in emerging markets like Europe. Per Andrea DiCenso, portfolio manager and strategist at Loomis Sayles and Co., investing in emerging market debts denominated in USD or euros can also offer lucrative returns in the current scenario.
“There’s also opportunity in emerging markets debt bonds issued by a foreign country. That are denominated in US dollars or euros. We’re seeing opportunities in frontier countries like Ghana, Kenya, and Ecuador in US dollar-denominated bonds. A lot of countries are also starting to see investors put money into their local-currency sovereign government bonds. You not only get high, attractive yields, but you also benefit from the currency appreciation.”
3. Invest in UK, Australian Bonds
Per Kristina Campmany, senior portfolio manager of macro alpha strategies at Invesco, making active investments in the UK and Australian bonds can bear fruitful results. The company later shares how diversifying into international fixed income regimes can help extract credible profits in times of a weak US dollar.
“Fixed income in Australia and the United Kingdom stands out as high-yielding countries offering value in developed markets. Within emerging markets fixed income, Brazil and India also offer value.”
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