Playing With Money Through Currency ETFs

Currency exchange traded funds (ETFs) are gaining popularity as the dollar is weakening, performance is up to par and they pay dividends based on foreign interest rates. Dan Caplinger for The Motley Fool says currency ETFs based on the value of other country’s currencies have made it easier for investors to bet on the direction of the dollar.  Take CurrencyShares for example:

• CurrencyShares Euro Trust (FXE) Each share of this represents 100 euro.
• CurrencyShares Japanese Yen Trust (FXY) holds 10,000 yen per shares.

By deciding how many shares to buy, the investor can control how much exposure they want to foreign exchange. Dividends are also paid out, as in the CurrencyShares Australian Dollar Trust (FXA) which pays 6.13%; CurrencyShares British Pound Trust (FXB) offers 5.43%. FXE pays out 3.77%.

For full disclosure, Tom Lydon is a member of the board for Rydex Investments.