Euro ETFs Show Easing Fears Over Greece, Debt Crisis
February 2nd at 8:00am by Tom Lydon
Exchange traded funds following the euro’s movements relative to the U.S. dollar are off to a solid start this year on hopes Greece will get more bailout aid and that the Eurozone crisis is cooling for now.
WisdomTree Dreyfus Euro Fund (NYSEArca: EU) is up 3.8% year-to-date and the CurrencyShares Euro Trust ETF (NYSEArca: FXE) has increased 1.0% year-to-date. The exchange traded note iPath EUR/USD Exchange Rate ETN (NYSEArca: ERO) is 1.4% higher year-to-date. The euro ETFs are moving above their 50-day moving averages. [Euro Shorts Squeezed as ETFs Jump]
The euro has appreciated 5% against the U.S. dollar since hitting a 17-month low on Jan. 13, reports Daivd Goodman for Bloomberg.
While European Central Bank President Mario Draghi has been implementing quantitative easing measures to help stimulate the economy, the billions in euro injected into the banking system has actually bolstered the euro, David Bloom, global head of currency strategy at HSBC Holdings, said.
“When the Fed does QE it circumvents the banking system and floods the market with money,” Bloom said. “When the ECB does QE, it does it through the banking system, who don’t really want to let it out. When the ECB does it, it means the euro is not breaking up. Once the break-up risk goes away the euro actually goes up.”
Recently the euro has been weakening over the uncertainty surrounding Greece’s debt talks, but better-than-expected global manufacturing activity helped push the euro higher Wednesday as demand for the safer U.S. dollar subsided, reports Catarina Saraiva for Bloomberg. [Greece ETF Up 20% in January]
“The main factor boosting the risk sentiment today is from the PMI reports globally,” Vassili Serebriakov, a currency strategist at Wells Fargo & Co. said in the article. “Markets are pricing in a more constructive outlook for global growth in 2012, so that’s the main factor behind dollar weakness and stronger risk appetite.”
WisdomTree Dreyfus Euro Fund
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Read the disclaimer; Tom Lydon is a board member of the funds for Rydex|SGI.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.