Each week seems to bring more dismal news about the financial crisis plaguing the European Union. For many U.S.-based investors, finding a safe haven with some exposure to European investments and some near-term upside is getting more challenging.

On Wednesday, Standard & Poor s lowered Spain s debt rating. A day earlier, the firm downgraded Greece to junk status and dropped Portugal s rating by two steps, triggering a selloff. The STOXX Europe 600 Index, which represents small- to large-cap companies throughout Europe, including Greece and Portugal, is down more than 3.5% since the beginning of the week. The euro which up until a year ago was trampling a weak U.S. dollar is hovering near a one-year low against the dollar.

The euro zone s weakness stems in part from the Greek debt crisis and concern over a contagion that could affect other nations. The European Commission announced Wednesday that it expects the joint European Union-International Monetary Fund bailout package for Greece to be finalized in the next few days and that debt restructuring for the country is not an option, Dow Jones Newswires reported.

So, where does this leave investors looking to capitalize on the euro zone s debt woes? Market strategists point to upside in two strategies. One is investing in products that display an inverse relationship to Greece and Portugal s problems, like the U.S. dollar or in some cases the German economy, whose exports are up because of the cheap euro. Another strategy could be shorting the market, with mutual funds or exchange-traded funds (ETFs) that experience an upswing during weakness in certain euro-zone sectors.

Almost any investment pegged to Europe s debt woes carries a significant risk. Investors should watch ratings and debt-to-GDP ratios when gauging those investments, but the most informative data may be yet to come. The most important thing is whether there will be more clarity coming out of Europe, says Axel Merk, president of Merk Investments. (Merk s company has been increasing its euro position in its hard currency fund.)

Ultimately, if Greece were to fail, that would be OK, but let s just get it out and over with and just deal with it. Not knowing what will happen and if this will be a patching solution vs. a real solution is negative for the euro and much of the region.

Right now, there appear to be several ways to play these markets, none of which are completely risk-proof.

Currency

The Euro: The fact that fiscal turmoil in Greece a country whose GDP accounts for just 2% to 3% of the euro zone s economy has had such a widespread effect across the continent does not bode well for the euro.

After reaching a one-year peak in December of $1.50, the euro s value has plummeted 12%. And with mounting economic problems in Portugal coming to the forefront, the euro s near-term prospects are questionable.

I don t think the sky is falling for the euro, and I wouldn t look for this to break up the union by any means, although it will create stress, says Dan Cook, a senior market analyst at IG Markets. I can definitely see more downside coming.

Investors can expect to see more fractures in its value as more countries debt woes emerge, with short-lived periods of growth following the release of the official terms of the Greek bailout. Investors willing to hold on for the long term will likely be rewarded. At some point, it will come back, but I wouldn t look for anything within a year, says Cook.

Other analysts say a stable rebound is farther off. Even if the crisis is contained, other issues could depress already-anemic economic growth and lead to a further delay in policy normalization by the European Commission Bank, says Omer Esiner, a senior currency market analyst at Travelex Global Business Payments.

The Dollar: Overnight, the U.S. dollar index, which measures its value against a basket of major currencies, rose to an 11-month high of $82.56, an increase of about 6% year to date. The jump reflects the dollar s inverse relationship to the euro during the past few months.

Typically, during periods of heightened risk aversion, like we re seeing now, you tend to see a broad flight to safety in quality so that lends itself to a stronger dollar, says Esiner. Despite America s huge fiscal issues, the dollar and dollar assets are still seen as a benchmark for safe-haven assets. He says investors can expect to see the dollar continuing to grow in value in the near term as it continues to benefit from the euro s weakness.

The Yen: This is another traditional safe haven during periods of low optimism and high volatility. Despite the currency s low yields, investors are buying back the yen and holding it until more clarity returns to the markets, says Esiner.

ETFs

Right now, Portugal, Ireland, Italy, Greece and Spain which some analysts and economists refer to as the PIIGS are in trouble. So unless an investor feels confident that the situation in those countries will improve drastically, they should focus on limiting their exposure to ETFs pegged to these economies, says Cook. That shouldn t be a problem because most funds that 95% of people are invested in probably won t have great deal of exposure there to begin with, he says.

One strategy is to look at the northern European economies. Many of those countries remain strong, in terms of manufacturing and exports. For example, the iShares MSCI Sweden Index (EWD) is up 11.2% year to date and the Global X FTSE Nordic 30 ETF (GXF) is up 5.65%.

Another strategy could be pinpointing ETFs that are bearish on the euro-zone economy. Keep in mind that these are highly complex instruments that often carry much risk. For example, the Direxion Daily Developed Markets Bear 3x Shares (DPK), which although down 2.6% year to date, has risen nearly 21% in April alone as the economic woes in Europe intensified.

Mutual Funds

The mutual funds pegged to Europe showing the most consistent growth are those tied to the continent s more stable economies. Germany continues to show strength, particularly among industrials and manufacturing, as the country benefits from an increase in exports. Still, there is some downside as investors remain wary of Germany s role in bailing out Greece. Separately, the United Kingdom is viewed as a safe haven, in part because it doesn t operate on the euro and it had been vocal about not stepping in to help Greece. The Vanguard European Stock Index Fund, with 31.4% exposure to the U.K. and 12.4% exposure to Germany, is up 37.8% over the past year.

Investors may also consider funds with exposure to Russia; however, those enjoying the most upside right now don t have much diversification, which could prove problematic in the long term. During the past year, funds like Eastern European Equity A, which has 80.7% exposure to Russia, mostly in the manufacturing sector, is up 85.3% over the past year.