Europe and Japan’s currencies, along with related exchange traded funds (ETFs), may showing strong gains, but the effects on their economies may not be so beneficial.
A weak U.S. dollar helps U.S. manufacturers, U.S. exporters and U.S. multinationals, writes Gary Gordon for ETF Expert. But a weak dollar means foreign exporters and foreign manufacturers are hurting as they try to sell to the U.S. market. (What’s so great about a weak dollar?)
For example, the strong euro is bad for business in the Eurozone. In August, exports dropped 6% from the previous month because of an appreciating euro. (More on the eurozone).
- CurrencyShares Euro Trust (NYSEArca: FXE): up 5.1% year-to-date
Japan is another country watching its currency appreciate. The Japanese yen is likely to stay stable since the island nation is heavily export dependent.
- CurrencyShares Japanese Yen Trust (NYSEArca: FXY): up 0.2% year-to-date
Both FXE and FXY are in an uptrend, tracking above their 50-day and 200-day moving averages.