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Tickers in this Article: UUP, IAU, LVL, LEH, SLV, GLD, UDN
The U.S. Dollar Index's recent move to the upside could lead investors to believe that the U.S. economy is beginning to pick up steam. Before drawing that conclusion investors should also note that the U.S. Congressional Budget Office, the body that estimates revenue for Congress, is estimating that the fiscal deficit for 2009 could reach a record $438 billion. The uncertain future of the U.S. dollar can be tracked and hedged with a basket of ETFs. (To begin with the basics, see Forces Behind Exchange Rates.)

The PowerShares DB US Dollar Index Bullish ETF (AMEX:UUP) struggled in the first part of the year and the bottom for the index seemed unclear. The Treasury has stepped in to rescue a select group of financial services firms. However, debt related issues of U.S. investment banks like Lehman Brothers (NYSE: LEH) are raising questions concerning when the U.S. Treasury should stop intervening. UUP has returned 2.66% to investors since the beginning of the year.

As if weighted on opposite sides of a scale, gold ETFs like the iShares COMEX Gold Trust ETF (AMEX:IAU) and the SPDR Gold Shares ETF (AMEX:GLD) are both down more than -8% since the beginning of the year. Silver-focused iShares Silver Trust ETF (AMEX:SLV) has fallen even harder dropping -26% over the same time period. Concerns over inflation that were felt at the pump and in grocery stores and when mixed with the falling U.S. dollar they were partly responsible for the record setting pricing for metals earlier this year. (To learn more about the gold market, check out Getting Into The Gold Market.)

Bear Outlook
For investors with a solid negative outlook on the U.S. dollar, the PowerShares DB U.S. Dollar Index Bearish (AMEX:UDN) is a good choice. UDN is designed to rise as the U.S. dollar falls.

Seek Dividends
The Claymore BBD High Income ETF (AMEX:LVL) is a small fund with net assets of less than $7 million. However the ETF currently sports a yield greater than 10%. LVL tracks the performance of the Design High Income index. LVL has returned about -13.77% to investors since the beginning of the year. (To learn more about the world of dividends, check out How and Why Do Companies Pay Dividends.)

Final Thoughts
The take away for investors is to note that as the U.S. dollar dropped, gold and silver rose dramatically. Since the dollar has regained some traction the inverse is happening, but with forecasts of an expanding budget deficit, inflation fears will likely persist. I cannot predict whether the rise of the dollar will continue, but recent history seems to suggest that the inverse relationship of the dollar and metals is likely to repeat itself in the future possibly creating opportunity for investors.

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