Goldman Sachs recently said thatthe U.S. dollar may slip to its lows of 2018 on the increasing likelihood of Democratic candidate Joe Biden winning the U.S. election and progress on a coronavirus vaccine (read: A Biden Presidency in the Making? ETF Strategies to Follow).

Strategists led by Zach Pandl said: "Although there are uncertainties around both, the risks are skewed toward dollar weakness, and we see relatively low odds of the most dollar-positive – a win by Mr. Trump, combined with a meaningful vaccine delay,” as quoted on Business Insider.

Goldman treads the same path as UBS Asset Management and Invesco Ltd. in predicting a weaker dollar as Biden extends his lead over President Donald Trump with less than three weeks to election day. Goldman said the chances of a so-called "blue wave" have increased to about 60%.

Joe Biden is currently leading Donald Trump in the national polls as the United States approaches its next presidential election. Currently, the 10-poll average indicates that just over half of Americans intend to back Joe Biden while Mr Trump’s support trails this by around five or six points, per an article on Telegraph.

Plus, many companies like Johnson & Johnson, Moderna, Oxford Astra Zeneca, Sinovac, Pfizer and Novavax are into coronavirus vaccine development. These companies have shown progress to some extent. If there is a vaccine sooner or later, dollar may lose on falling safe-haven demand.

Why Dollar Could Weaken If There Is Biden Presidency

Rock-bottom interest rates, higher taxes, ebbing tensions with China and a relatively tepid Wall Street could result in weakness in the greenback if Biden wins, although that could be tempered by a big fiscal stimulus, per foreign exchange analysts as quoted on S&P Global.

A weaker dollar would make U.S. exports cheaper, benefiting large-cap stocks with greater exposure to foreign markets. This will also taper down the widening trade deficit. However, we do not expect the weakness to be grave enough to hurt the greenback and question its safe-haven status (read: A Biden Presidency in the Making? ETF Strategies to Follow).

ETFs to Play

Against this backdrop, one can bet on the following ETFs if he/she wants to follow Goldman Sachs. The research house recommends selling the U.S. dollar against a currency basket made up of the South African rand, Indian rupee and the Mexico peso, and advises buying the Australian and Canadian dollars and the euro.

Invesco CurrencyShares Canadian Dollar Trust (FXC Quick QuoteFXC - Free Report) , Invesco CurrencyShares Australian Dollar Trust (FXA Quick QuoteFXA - Free Report) , Invesco CurrencyShares Euro Currency Trust (FXE Quick QuoteFXE - Free Report) and WisdomTree Emerging Currency Fund (CEW Quick QuoteCEW - Free Report) are the currency ETFs that could be played on Goldman’s suggestion.

Plus, investors can play Invesco DB US Dollar Index Bearish Fund (UDN Quick QuoteUDN - Free Report) .The underlying Deutsche Bank Short USD Currency Portfolio Index - Excess Return is a rules-based index composed solely of short U.S. Dollar Index futures contracts that trade on the ICE futures exchange. The fund charges 80 bps in fees.

SPDR S&P 500 ETF Trust (SPY Quick QuoteSPY - Free Report)  can gain too as large-cap stocks are a great bet in a falling dollar environment. The fund charges 9 bps in fees. SPDR Gold Trust (GLD Quick QuoteGLD - Free Report) isdesigned to track the spot price of gold bullion. Commodities perform well in a falling dollar environment and gold could gain.

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