Currency exchange traded funds (ETFs) have helped investors to cash in on the weakness of the U.S. dollar, while giving exposure to foreign currency in the process.
So far this year, the U.S. dollar has been down 7% against the euro and 6% against the Japanese yen. The latest exchange traded products are using leverage to tempt investors to go ahead and bet against the weak U.S. dollar, reports Eleanore Laise for The Wall Street Journal.
But is the timing off? The government is dropping hints that it wants to start turning the currency around, and Federal Reserve Chairman Ben Bernanke said he was ready to start defending the dollar. It’s lost a quarter of its value in the last six years, says Colin Barr for Fortune.
Will the government follow through? While we wait for an answer on that, the products keep coming.
Last month, both WisdomTree and Dreyfus rolled out new ETFs focused on currency in reaction to the latest market conditions. The latest offerings are actually exchange traded notes (ETNs) trying to get a leg up on returns, by magnifying ups and downs:
- Market Vectors Double Long Euro ETN (URR): Tracks an index designed to gain 2% for every 1% gain in the euro relative to the U.S. dollar.
- Market Vectors Double Short Euro ETN (DRR): Provides the opposite exposure, generally gaining 2% for every 1% decline in the euro versus the dollar.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. 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.