ETF Spotlight: CurrencyShares Japanese Yen (FXY) | ETF Trends

ETF Spotlight on CurrencyShares Japanese Yen Trust (NYSEArca: FXY), part of an ongoing series. The currency ETF is back near its March high, erasing the losses it suffered in the wake of Japan’s devastating earthquake and tsunami.

Assets: $161.3 million.

Objective: The ETF tries to reflect the performance of the Japanese yen against the U.S. dollar.

Holdings: The fund holds assets in an interest-yielding Japanese bank account.

What You Should Know:

  • FXY has an expense ratio of 0.40%.
  • Currency movements are quick, unpredictable and notoriously difficult to trade.
  • Since the fund holds accounts in Japanese banks, investors will only receive returns of cash along with accumulated change in the strength of the Japanese yen against the U.S. dollar.
  • “With Japanese rates at incredible lows, investors in this fund receive near 0% interest and pay 0.40% a year in expenses to hold the Japanese yen,” according to Morningstar analysts. “Although rates are likely to rise in the future, it would likely provide a disappointing long-term return.”
  • “During good times for the global economy, the incredibly low yield on the yen helps keep it weak as traders sell huge amounts of yen to buy higher-yielding currencies for the carry trade,” added the analysts.
  • The Japanese yen has historically served as a safe-haven asset for investors.

The Latest News:

  • FXY rose close to its 52-week high on Wednesday as the dollar plunged after Fed chief Ben Bernanke repeated the central bank stands ready with more stimulus for the economy if needed. [Stock, Metals ETFs Surge]
  • The Japanese yen rallied against the U.S. dollar Tuesday as the U.S. Commerce Department announced that the country’s trade deficit unexpectedly widened $50.2 billion to its largest level in more than two and a half years, reports Annalyn Censky for CNNMoney.
  • FXY was hit hard after the natural calamity struck earlier this year, but has since recovered. [Japan ETF in Focus as Government Says Economy in ‘Severe Condition’.]
  • Japan’s central bank is growing more optimistic about the economic recovery, and many observers believe the country will be back to pre-quake production levels by the end of fall, writes Eric Dutram for The Motley Fool. Many expect the bank to boost GDP projections above the 3.0% mark.
  • Safe-haven investors sought refuge in the Japanese yen on concern over the threat of the financial contagion spreading in Europe, reports Tetsushi Kajimoto for Reuters.

For past stories in this series, visit our ETF Spotlight category.