ECB Speculation Drives Euro ETF to Three-Month Low
May 15th, 2014 at 2:40pm by Max Chen
Speculation that the European Central Bank will increase monetary easing at the meeting next month helped push down the euro exchange traded fund, with the currency touching an 11-week low Thursday.
The CurrencyShares Euro Currency Trust (NYSEArca: FXE) has declined 1.5% over the past week and traded near a three-month low Thursday.
Meanwhile, the euro currency touched $1.3647 on Thursday, its weakest level against the U.S. dollar since February 27, reports Richard Leong for Reuters.
The euro rapidly declined as traders position ahead of the ECB move in June. The EUR was trading around $1.3995 just last week, a two-and-a-half year high.
“With the euro, investors are positioning for an ECB move in June,” Mark McCormick, currency strategist at Credit Agricole Corporate & Investment Bank, said in the article. “There are signs the ECB are ready to act.”
Sources close to the ECB hinted that the central bank is preparing a package of policy options, including cuts to its interest rates and measures to bolster lending to small- and mid-sized businesses.
Monetary easing would increase the supply of euros in the economy, which would depreciate the value of the euro against a basket of currencies. Additionally, the looser policies could also help promote economic growth within the Eurozone.
Investors interested in gaining exposure to the expanding European economy can consider Europe ETFs that hedge against a depreciating euro currency. For example, the db X-Trackers MSCI Europe Hedged Equity Fund (NYSEArca: DBEU) and the WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) are both designed to outperform a non-hedged Europe fund if the euro currency depreciates against the U.S. dollar. [Two ETFs Pricing in ECB Easing]
Additionally, investors can track Germany, the largest Eurozone economy, through hedged-equity strategies as well, including the db X-trackers MSCI Germany Hedged Equity Fund (NYSEArca: DBGR), the WisdomTree Germany Hedged Equity Fund (NasdaqGM: DXGE) and the iShares Currency Hedged MSCI Germany ETF (NYSEArca: HEWG).
CurrencyShares Euro Currency Trust
For more information on the Eurozone currency, visit our euro category.