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ETF Specialist

The Dollar-Proof Portfolio

We produce a model portfolio for those worried about a collapsing greenback.

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The rising concern about the United States dollar's value has become impossible to miss. Gold has risen above $1,000 an ounce; investors desperate for energy exposure have kept natural gas in steep contango all year; and every other day we seem to get a call or an e-mail asking about foreign currency funds such as PowerShares DB US Dollar Bearish (UDN).

We understand the fretting. Various emergency measures over the past year pumped enormous quantities of dollars into the financial system, and they're more likely to cause inflation now that we no longer have panicked investors worldwide clamoring for the safe harbor of the dollar. Chinese central bank officials dropped hints for much of the past year that they would like to diversify away from Treasury bonds, and recent large investments in commodities and mines show they might be serious this time. Even the new Japanese Minister of Finance made comments that implied Japan may no longer suppress its currency against the dollar to support exporters. Without the artificial support of the major East Asian currencies, we couldn't say how far the dollar might fall.

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Bradley Kay does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.