Dollar Slides to Near Four-Year Low: ETF Strategies to Play

• The yen strengthened significantly, with Invesco CurrencyShares Japanese Yen (FXY) gaining 3.8% over the past week while the Invesco DB US Dollar Index Bullish Fund (UUP) lost 2.6%
• Dollar weakness is boosting commodities and real assets, with SPDR Gold (GLD) up 19.5% year-to-date and broader commodities tracking funds gaining about 10%
• De-dollarization trends favor emerging markets and digital currencies, with Pacer Emerging Markets ETF (ECOW) up 8.5% and Global X Blockchain ETF (BKCH) up 15.5% year-to-date

Dollar Slides to Near Four-Year Low: ETF Strategies to Play

Key Developments

The U.S. dollar has fallen to its weakest level in nearly four years, driven by mounting policy uncertainty and yen strength amid intervention speculation. The Invesco DB US Dollar Index Bullish Fund (UUP) declined 2.6% over the past week as of January 27, 2026.

Main Drivers

Multiple factors are pressuring the greenback: erratic Washington policymaking including President Trump's Greenland threats, concerns over Federal Reserve independence, widening budget deficits, and deepening political polarization. The risk of government shutdown has intensified as Democrats threaten to block spending packages over Homeland Security funding disagreements.

The yen has strengthened significantly on speculation of coordinated U.S.-Japan currency intervention, with Invesco CurrencyShares Japanese Yen Trust (FXY) gaining 3.8% over the week. The yen rebounded from near 160 per dollar earlier in January to 152.64 at the time of writing. The euro reached its strongest level since 2021, while the pound hit its highest since July.

Additionally, BRICS de-dollarization efforts have reduced the dollar's international reserves to 56.3% between April-June 2025, according to the IMF.

Investment Strategies

Analysts recommend several ETF plays:

• Inverse dollar exposure: Invesco DB US Dollar Index Bearish Fund (UDN)
• Commodities: SPDR Gold (GLD) up 19.5% YTD; Invesco DB Commodity Index (DBC) up 10% YTD
• Emerging markets: Pacer Emerging Markets Cash Cows 100 ETF (ECOW) up 8.5% YTD
• Large-cap stocks: SPDR S&P 500 ETF (SPY) benefits from foreign exposure
• Blockchain/crypto: Global X Blockchain ETF (BKCH) up 15.5% YTD