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May's Top ETFs Like the Weak Dollar

When reviewing the top 10 rated exchange-traded funds and notes this month, an obvious theme emerges. As the U.S. dollar erodes in value, nine of the 10 funds directly benefit.

The U.S. Dollar Index compares our "greenbacks" to a basket of six major world currencies, and shows that we have lost 11.45% in the last year. Even after fractionally positive months of April and May, the year-to-date loss is 4.98%. The May 31 reports of shrinking industrial production and nonfarm payrolls coincided with CPI inflation running at 4.2% in the United States.

All of the top 10 funds received A+ ratings for the period ending May 31.

Six of the top 10 funds track various currencies against the U.S. dollar with the iPath EUR/USD Exch Rate ETN (ERO) taking top honors. The second place CurrencyShares Euro Trust (FXE) did just as well betting on the same currency.

The Eurozone economy may have declining retail sales and consumer confidence but currency traders have still preferred the euro as a store of wealth to the U.S. dollar over the last year.

Another big difference between America and Europe is in the balance of trade. While Europe is a net exporter, America imports more goods than it exports. For companies to return their sales revenue to their home country they sell dollars, further pushing down its value.

Sweden did not join in on the Euro currency. Their Krona has fared well against the U.S. dollar over the last year massaging the CurrencyShares Swedish Krona Trust (FXS) to a double-digit gain.

Three of the funds listed below appreciated from hard asset holdings measured in U.S. dollars.

As the U.S. dollar loses value, it takes more dollars to buy commodities such as precious metals and, more specifically, gold. This has been great news for investors in PowerShares DB Gold Fund (DGL), PowerShares DB Commodity Index (DBC), and PowerShares DB Precious Metals Fund (DBP).

Lastly, the Market Vectors Environmental Services ETF (EVX) also scored an A+ rating with large holdings of Republic Services (RSG), Waste Management (WMI), Stericycle (SRCL), Newpark Resources, Tetra Tech (TTEK) and Allied Waste Industries (AW).

Top 10 Rated Exchange-Traded Funds & Notes
Fund (Ticker) Rating Total % Return 1 Year Objective
iPath EUR/USD Exch Rate ETN (ERO) A+ 21.02 Non-US Equity
CurrencyShares Euro Trust (FXE) A+ 22.13 Non-US Equity
CurrencyShares Swedish Krona Trust (FXS) A+ 22.29 Non-US Equity
PowerShares DB US Dollar Bearish Fd (UDN) A+ 16.48 Growth - Domestic
PowerShares DB Gold Fund (DGL) A+ 33.88 Sector - Precious Metals
CurrencyShares Australian Dollar Tr (FXA) A+ 20.91 Non-US Equity
CurrencyShares Swiss Franc Trust (FXF) A+ 22.90 Non-US Equity
PowerShares DB Commodity Idx Track (DBC) A+ 69.04 Growth - Domestic
PowerShares DB Precious Metals Fund (DBP) A+ 34.08 Sector - Precious Metals
Market Vectors Environment Ind ETF (EVX) A+ 13.68 Equity Income
Source: Ratings

For an explanation of our ratings, click here.

Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.

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