ETF Spotlight on CurrencyShares Japanese Yen Trust (FXY), part of a recurring series.

$843 million

This fund seeks to track the price of the Japanese yen.

Brief summary of the sector or area the fund covers: This fund began on Feb. 12, 2007, and tracks the national currency of Japan. Recent market volatility has sent investors in a flight to safety toward the yen, whose appeal has an inverse relationship with the appetite for risk. A low-yielding yen is a barometer for risk around the world, reports Lisa Twaronite for MarketWatch.

Until recently, the overriding theme in yen investing has been the carry trade, where investors borrow low-yielding currencies, and then invest them in assets denominated in higher-yielding currencies. This fund has an expense ratio of 0.40%.

What’s good

  • If the risk-aversion continues, investors will liquidate their positions. Unwinding the carry trade benefits the yen, and in turn, this fund.
  • Some experts and strategists feel that the yen will continue to be the strongest currency in the world.

What to watch out for

  • While the yen has “safe haven” appeal, it’s not like other safe havens in that there’s no explicit guarantee backing a currency.
  • The yen is backed by Japan’s account surplus, which remains strong, although it’s shrinking.

Japanese Yen Exchange Traded Fund (ETF)

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.