The U.S. dollar has had its ups and downs this year. By investing in exchange traded funds (ETFs), currency traders may capitalize on this widening disparity in currency strengths without using forex or futures accounts.
An investor with a penchant for trading currencies may consider investing in currency ETFs, which are basically trusts that can be bought and sold through a traditional brokerage, remarks Nick Thomas for Jutia Group. These ETFs are listed on the NYSE Arca, can be traded like stocks and cover a basket of currencies or country-specific currencies. (ETF Trends’ guide to currency ETFs).
Additionally, providers have also issued currency ETF vehicles that are short, or ultra-short, but most come in the standard “long” ETF.
So far this year, the CurrencyShares Australian Dollar Trust (NYSEArca: FXA) is perhaps the best performer, up 31.1% year-to-date. WisdomTree Dreyfus Brazilian Real (NYSEArca: BZF) Other top performers include CurrencyShares Swedish Krona Trust (NYSEArca: FXS), up 11.6% year-to-date, and CurrencyShares Mexican Peso Trust (NYSEArca: FXM), up 13.1% year-to-date. (How to use foreign currency ETFs to your advantage).
Essentially, most countries other than the United States are preserving the value of their currency, and an investor could have hedged against the falling dollar with some foreign currency ETF allocations. But just because the U.S. dollar is now at a monthly high, it doesn’t mean there aren’t options left. The currency market is one that is always moving and shifting, and some feel that the dollar’s gain this morning is just temporary.