Betting against the U.S. Dollar (UDN, UUP)

We continue to print money and U.S. Dollar keeps falling in value, its time to take a look at the ETFs (and Puts) you can play that relate to the Bullish and Bearish direction of the U.S. Dollar.

The two ETFs that react to the price of the Dollar:

- PowerShares DB US Dollar Index Bearish (NYSE:UDN)

- PowerShares DB US Dollar Index Bullish (NYSE:UUP)

For the most part these two ETFs trade against each other, but daily volatility can take your returns before you get a chance to cash them out:

The market consensus is the dollar is going to get crushed in the next few months:

Dec. 24 (Bloomberg) -- Japan should write-off its holdings of Treasuries because the U.S. government will struggle to finance increasing debt levels needed to dig the economy out of recession, said Akio Mikuni, president of credit ratings agency Mikuni & Co.

The dollar may lose as much as 40 percent of its value to 50 yen or 60 yen from the current spot rate of 90.40 today in Tokyo unless Japan takes “drastic measures” to help bail out the U.S. economy, Mikuni said. Treasury yields, which are near record lows, may fall further without debt relief, making it difficult for the U.S. to borrow elsewhere, Mikuni said. 

The Atlantic put out an article earlier this month, featuring Gao Xiqing, you may remember him from his interview on 60 Minutes back in April.

In his first interview since the world financial crisis, Gao Xiqing, the man who oversees $200 billion of China’s $2 trillion in dollar holdings, explains why he’s betting against the dollar, praises American pragmatism, and wonders about enormous Wall Street paychecks. And he has a friendly piece of advice - click to read.

Lets not forget how much China has invested in U.S. Securities, what happens if they start cashing out, releasing even more bucks?

From June 07:
China has now replaced the United Kingdom as the second largest foreign holder of U.S. long-term securities. In the Treasury Department report released May 31, 2007, China holds $699 billion of U.S. stocks, bonds and U.S. Treasury notes, compared to the U.K., which holds $640 billion. Japan remains the largest holder, at $1.106 trillion in U.S. securities.

You don't have to try very hard to find the press talking up how the U.S. Dollar is going down, so instead of trying to fight it, perhaps the best option to gain the most from the falling Dollar is to look at the Puts on the UUP:

Strike	Symbol	Last	Chg	Bid	Ask	Vol	Open Int
22.50	UUPMX.X	0.20	0.00	N/A	0.25	44	373
24.00	UUPMY.X	0.35	0.05	0.35	0.50	10	21
25.00	UUPME.X	1.00	0.15	0.75	1.00	100	176
26.00	UUPMZ.X	1.45	0.00	1.45	1.75	7	153
27.00	UUPMA.X	2.25	0.00	2.25	2.80	8	23
28.00	UUPMB.X	2.80	0.00	3.20	3.80	4	1

Strike	Symbol	Last	Chg	Bid	Ask	Vol	Open Int
20.00	UUPOD.X	0.25	0.00	0.05	0.25	1	895
22.50	UUPOX.X	0.50	0.00	0.40	0.70	80	1,701
24.00	UUPOY.X	1.05	0.00	0.90	1.15	13	239
25.00	UUPOE.X	1.65	0.30	1.50	1.65	54	4,027
26.00	UUPOZ.X	2.00	0.00	1.95	2.25	30	301
27.00	UUPOA.X	2.70	0.00	2.65	3.20	83	425
28.00	UUPOB.X	2.10	0.00	3.50	4.00	10	30
29.00	UUPOC.X	2.90	0.00	4.30	4.90	10	98
30.00	UUPOF.X	6.30	0.00	5.20	5.90	11	386

Strike	Symbol	Last	Chg	Bid	Ask	Vol	Open Int
20.00	UUPRD.X	0.55	0.00	0.35	0.65	10	352
21.00	UUPRV.X	0.70	0.00	0.40	0.80	5	10
22.50	UUPRX.X	1.10	0.00	0.80	1.15	65	657
24.00	UUPRY.X	1.55	0.25	1.30	1.70	10	374
25.00	UUPRE.X	2.00	0.00	1.85	2.00	50	833
26.00	UUPRZ.X	2.45	0.00	2.35	2.90	20	478
27.00	UUPRA.X	3.40	0.00	3.00	3.70	4	361
28.00	UUPRB.X	4.20	0.00	3.90	4.60	45	66
29.00	UUPRC.X	5.00	0.00	4.60	5.30	55	104
30.00	UUPRF.X	5.80	0.00	5.70	6.20	2	58