The dollar is a long-term basket case - as measured by the U.S. Dollar index, which values the dollar against a basket of foreign currencies, the dollar is roughly half as valuable as it was in the mid-1980s. How far it may fall, and how fast, of course, is impossible to forecast. In the near term, a serious flare-up in the Eurozone could cause the dollar to spike temporarily, for instance. How should planners play this dollar uncertainty to ensure the best outcome for clients?

"One thing is certain, planners can no longer ignore currency risk," says Axel Merk, president and chief investment officer of Merk Funds, the Palo Alto, Calif.-based group of currency mutual funds. In addition to currency considerations, there are macroeconomic complications planners need to factor in as well when designing portfolio strategies because fluctuations in currencies have an impact on the wider economy.

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