As the U.S. dollar depreciates because of  increased government spending, investors may turn to exchange traded funds (ETFs) to defend their wealth. Here’s how.

The U.S. dollar is under attack and there are several factors that are eating away at the dollar’s strength, remarks Ron DeLegge for ETF Guide. The Chinese yuan is being pushed to be included in the IMF’s basket of fund payments for bilateral trades, and the currency may overtake the U.S. dollar as the world’s reserve currency. The U.S. government is also continuing its defacement of the dollar by increasing spending and deficits.

• WisdomTree Dreyfus Chinese Yuan (CYB): up 2.7% year-to-date
• PowerShares DB US Dollar Index Bullish (UUP): down 2.6% year-to-date
• PowerShares DB US Dollar Index Bearish (UDN): up 1.8% year-to-date

How can an investor protect one’s wealth against a falling dollar?

Currency Funds. These types of ETFs let you capitalize on the strength of foreign currencies. Currency ETFs short the dollar to its corresponding currency. Top-performing Rydex Investments currency ETFs include:

• CurrencyShares Australian Dollar Trust (FXA): up 10.4% year-to-date
• CurrencyShares Canadian Dollar Trust (FXC): up 8.5% year-to-date
• CurrencyShares Mexican Peso Trust (FXM): up 5.9% year-to-date

Hard Assets. These are assets not correlated to the dollar. Such investments include precious metals such as gold and silver. While the physical metals are lovely to look at and lovely to hold, ETFs are also an easy to way to invest in the metals, mainly because they eliminate the hassle of finding and paying for storage.

Full Story:  http://www.nasdaq.com/newscontent/20090529/how-to-use-etfs-to-diversify-away-from-the-dollar.aspx?storyid=0689

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