Protect Yourself From The Dollar Drop

Question: I know I can protect my portfolio against inflation by investing in TIPs and against market volatility by diversifying my investments. But how can I hedge against adverse U.S. dollar movements? - Brian Canes, Scarsdale, N.Y.

Answer: It's not surprising that, like you, many investors are looking to insulate themselves from fallout from the declining buck or even profit from its slide.

After all, the dollar - which recently slumped to an all-time low of $1.48 vs. the Euro - has been commanding less respect lately than the late comedian Rodney Dangerfield used to get. There's been talk that central banks may begin diversifying at least part of their currency reserves into Euros, while some oil-rich Persian Gulf countries are considering no longer pegging their currencies to the dollar.

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