U.S. investors are buying and selling foreign currencies both as a hedge against their U.S. dollar holdings and as a way to speculate on global economic upheaval. Exchange traded funds (ETFs) can help get everyone the exposure they want.
Currency ETFs have seen lots of action lately, thanks in part to tumultuous world events thrusting some currencies into the spotlight, as well as generally increasing interest in currencies. Some experienced traders deal with foreign-exchange brokers who allow buying and selling with leverage—money borrowed from the broker—which magnifies gains, but also compounds losses, explains Jonathon Burton for The Wall Street Journal. [What Can a Currency Tell About an Economy?]
For those who decide to invest in currencies and are comfortable making their own judgments about currency strengths and countries’ fundamentals, a forex trading account or foreign-currency certificates of deposit are good options. But ETFs may be a far simpler bet for the average investor, and there is no shortage of options. [Our Guide to Currency ETFs.]
Many ETFs offer foreign currency exposure which helps access corners of the world that are hard to reach. They can also be an emerging market play, so be aware of the implications of a currency investment to the overall economic health of the country. In each of the foreign currency ETFs, you may make money if the currency being held appreciates against the U.S. dollar. You would lose money if the dollar strengthens. [The U.S. Dollar Revels In Being a Safe Haven.]
For more stories about currency ETFs, visit our currency ETF category.
- PowerShares DB U.S. Dollar Index Bullish (NYSEArca: UUP)
- CurrencyShares Euro Trust (NYSEArca: FXE)
- PowerShares DB G10 Currency Harvest (NYSEArca: DBV)
- CurrencyShares Canadian Dollar Trust (NYSEArca: FXC)
- CurrencyShares Mexican Peso Trust (NYSEArca: FXM)
- WisdomTree Brazilian Real (NYSEArca: BZF)
- CurrencyShares Australian Dollar Trust (NYSEArca: FXA)
Read the disclaimer; Tom Lydon is a board member of Rydex|SGI.
Tisha Guerrero contributed to this article.
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.