The Dollar's Problem

Editor's note: The following article was originally published as two RealMoney blog entries, on 10/22/09 and 10/23/09. It is being republished as a bonus for TheStreet.com readers. Click here for information on RealMoney, where you can see all the blogs, including Don Dion's -- and reader comments -- in real time.

NEW YORK (TheStreet) -- Betting against the U.S. dollar has become extremely popular in recent weeks. It's an axiom in investing that when an asset rises or falls greatly in price, only then will it become widely popular to be bullish or bearish on it.

No one was interested in gold at the height of the dot-com boom, when it could be had for $250 an ounce. And most folks still weren't interested throughout the 2000s. Since the financial crisis began in 2007, gold has become an increasingly popular asset for a variety of reasons. SPDR Gold Shares(GLD Quote) has become the second-largest exchange-traded fund in existence, behind only SPDR(SPY Quote).

Similarly, investors appear to realize the dollar is weak all of a sudden, even though the dollar has been in decline since 2000. At that time, the dollar was worth more than one euro, while today it fetches about 0.67 euros.

Still, one of the best trading and investing maxims is, "the trend is your friend." I hold PowerShares DB U.S. Dollar Bearish (UDN Quote) as part of some client portfolios and it has performed decently as the dollar declines. Aggressive traders may prefer more volatile currencies, such as the Australian or New Zealand dollars, or emerging-market currencies.

Recently, traders have been focused on which countries will raise interest rates. The Australian dollar rallied against the greenback after the Australian central bank increased rates on Oct. 6, and the pound rallied this week after Mervyn King, the Governor of the Bank of England, wrote in a newspaper opinion article that U.K. interest rates would have to rise "at some point".