The invention of currency-focused exchange traded funds (ETFs) allows investors to put their money into the rising euro or protecting dollar denominated assets without having to deal with futures or foreign exchange. Currency ETFs replicate the movements in the currency within the exchange market by either holding currency cash deposits or using futures contracts on the underlying currency, reports George D. Lambert for Investopedia. Both of these methods have a highly correlated return to the actual movements of the currency over time.

ETF providers Rydex and PowerShares have released a collection of funds to allow investors an easy route to participate in global currency markets. Rydex currently offers 8 CurrencyShares, a series of ETFs that track the price of currencies from the euro to the yen and Swedish krona. An investor buys shares in a trust and their value increases or decreases with the value of the currency in relation tot he U.S. dollar. If the dollar drops, the shares increase. PowerShares offers a bullish and a bearish dollar ETF as well as a currency harvest ETF based on the G-10 countries.

Whether you think the euro’s 15% rise against the dollar has come to an end, or that the dollar’s recent slide will continue, investors have a choice to play this out in their portfolios.

Read the disclosure, as Tom Lydon is a member of the board for Rydex Investments.

Tags: Currency ETFs