The foreign exchange is the world’s largest market and it’s getting larger, thanks to exchange traded funds (ETFs).
Currency markets were already a gargantuan enterprise, with $3.3 trillion a day in trading volume. Those numbers, last measured in 2007, were just measured again: trading volume in currency markets has soared 20% to $4 trillion a day.
It makes $3.3 trillion sound almost quaint. [What’s in Currency ETF Investing for You?]
Dave Kansas and Tom Lauricella for The Wall Street Journal report that there are several possible causes behind this rapid growth:
- The eurozone debt crisis likely boosted trading volumes in the euro.
- The rise in trading is a byproduct of the globalization of investing as traders look overseas for returns, particularly in emerging markets. Volume in the Brazilian real, Chinese yuan and Indean rupee all surged in between survey periods. [How to Travel the World With Currency ETFs.]
- Small investors are simply realizing the value of diversification and have incorporated a currency strategy into their portfolios.
- As with commodity investing, currency investing has become far easier with ETFs. Just six years ago, there was one currency ETF. Today, there are 44.
Read our guide to currency ETFs to learn more about this market, how it works and how the various currency ETFs get their exposure.
Tisha Guerrero contributed to this story.
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.