The Massive ‘Dollar Sell-Off’ of 2026: Strategies to Profit from the Decline of the US Currency

Evaluating ETFs as Market Tools

My frequent discussions about exchange-traded funds (ETFs) make it clear that I’m a fan. However, while ETFs offer many advantages, they aren’t flawless when it comes to mirroring the market. With the U.S. dollar facing possible volatility, ETFs might seem like a logical way to participate, but I’m not relying on them exclusively for this strategy.

Tracking the U.S. Dollar with ETFs

Take the Invesco DB US Dollar Index Bullish Fund (UUP) as an example. Since 2007, it has closely followed the U.S. Dollar Index ($DXY), which measures the dollar against a basket of global currencies. However, UUP occasionally issues distributions, which can distort its price chart—noticeable in the form of gaps after such events.

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On December 22, 2025, the DXY index slipped by about 0.33%, but UUP dropped a much steeper 3.7%—the difference was due to a distribution. If you’re aiming to benefit from significant dollar movements using UUP or its inverse, the Invesco DB US Dollar Index Bearish Fund (UDN), it’s important to first analyze DXY’s performance before turning to these ETFs.

The U.S. Dollar Index has a long history, stretching back decades. A look at the monthly chart reveals that, for the first time in several years, the 20-month moving average is now declining.

The End of Dollar Dominance?

The U.S. dollar has long been supported by higher interest rates and the perception of American economic strength. However, in 2026, the landscape is changing. Morgan Stanley anticipates the Dollar Index could fall to around 94 by the second quarter, a level not seen since 2021.

This downward pressure is the result of shrinking interest rate gaps, ongoing government deficits, and a shift in global investment toward undervalued international assets. Although the dollar showed some short-term strength in January, it’s now facing strong resistance near the 100 mark. If it fails to break through, selling pressure could intensify, making a bearish dollar trade a prominent theme.

If you expect the dollar to weaken structurally, holding cash isn’t the answer. Instead, consider assets that benefit when the dollar declines—such as UDN.

UDN: A Tool for Diversification

UDN’s chart also reflects the impact of distributions, but looking back to early 2025, the fund delivered a rally of over 10%. As illustrated below, UDN has both a low beta and a weak correlation with the U.S. stock market, making it a strong candidate for diversification.

The most likely direction for the dollar appears to be downward, driven by ballooning U.S. debt and growing concern from global investors. Ongoing trade tensions only add to the pressure.

2026 brings a different environment than the previous year. Investors are increasingly seeking alternatives to U.S. equities. The dollar’s renewed weakness against other major currencies is just one of several ways to diversify in the current climate.

About the Author

Rob Isbitts is a semi-retired fiduciary investment advisor and fund manager. You can find his research at . To follow his portfolio strategies, explore the new PiTrade app. For insights on racehorse ownership as an alternative investment, visit .