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Three Ways to Play a Falling Dollar

Stocks in this article: IYR VGT DBB

NEW YORK ( -- The fundamentals of the dollar remain weak, and the currency continues to lose ground against its counterpart currencies as the U.S. government continues to borrow money and drive up the deficit. Although this is discouraging news, investors can capitalize on the dollar's weakness in three ways.

First, one can utilize a declining dollar by investing in companies that make goods domestically and sell them abroad. It is fairly self-explanatory that a weaker dollar attracts foreigners who want to purchase cheaper goods and, in a larger sense, cheaper assets.

When it comes to assets, foreigners are looking at buying up cheap U.S. real estate in particular. According to a survey conducted by the Association of Foreign Investors in Real Estate, foreign lenders are planning to increase their lending by 58% in the U.S., and equity investors are expected to increase their investment activity by 73%.

Investors can benefit from this by taking a look at the iShares Dow Jones US Real Estate (IYR). The ETF is up 88% from its March low of $22.21 to close at $41.66 on Tuesday.

Another good play on companies that have heavy exposure overseas is through technology. A diversified play on technology is the Vanguard Information Technology ETF (VGT), which is heavily concentrated in large-cap stocks. The ETF is up 69% from a March low of $29.36 to close at $49.74 on Tuesday.

Lastly, a weak dollar makes commodities more attractive to foreign investors. Just yesterday, gold hit a yearly high as the dollar continued its decline. A good way to grab broad exposure to commodities is through the PowerShares DB Base Metals (DBB) which gives exposure to aluminum, copper and zinc, which will all see an increase in demand as the once almighty greenback falls. To add icing to the cake, DBB will also benefit as emerging and frontier markets continue to grow and prosper. DBB closed at $17.93 on Tuesday, up 64% from a February low of $10.95.

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