The Dollar Drag

As the currency's value falls, your investments could take a hit. Here's how to stop that drop

Have you hedged your portfolio against the falling dollar? If not, there's still time to act. Since January 2002 the greenback has declined 25% against the euro and 16% against the Japanese yen. And many foreign-exchange experts say the dollar may drop an additional 5% to 10% against major currencies over the next year. One key reason for the dollar's woes is the bulging U.S. trade deficit, which is likely to top $600 billion, or 6% of GDP, in 2004.

Lower U.S. interest rates have also led fixed-income investors to seek out countries offering higher rates. And the swelling budget deficit,...

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