Is there hope for the U.S. dollar and if so, what about the currency exchange traded funds (ETFs) and exchange traded notes (ETNs)?
The dollar has hit lows against major currencies such as the yen and euro. The weak dollar has helped increase the price of commodities, such as oil and food, made imported goods more expensive for the U.S. consumer and probably affected travel plans for the summer.
Investors looking to benefit from the falling dollar can look at ETFs and ETNs that cover currencies from the euro, to the yen, to the rupee. Among the offerings and their performance year-to-date:
- CurrencyShares Euro Trust (FXE), up 8.6%
- CurrencyShares Japanese Yen Trust (FXY), up 8.7%
- Market Vectors Indian Rupee (INR), up 2.4% since March 18th inception
There are some who think this might be it for dollar lows. In fact, the dollar rose today against the euro and has been rebounding against the yen since March, reports Paul R. La Monica with CNN Money. If the Federal Reserve puts a halt on the lowering of interest rates, then the dollar could benefit. If the European Central Bank were to begin cutting rates, this could help the dollar rally.
If indeed the dollar turns around, then it becomes important to have an exit strategy for any funds that might not like the rising dollar. Our exit strategy uses the 200-day moving average, so if the ETF falls below the trendline, then it is time to sell.
For full disclosure, some of Tom Lydon’s clients own FXY.
Read the disclosure, as Tom Lydon is a board member of Rydex Funds.
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.