Currency exchange traded funds pegged to perceived safe havens such as the U.S. dollar and Japanese yen have rallied on fears Greece will leave the euro.
The Japanese yen, U.S. dollar and even Swiss franc are considered reliable currencies during times of global distress as these countries offer lower lending rates. Additionally, Japan and Switzerland have strong current accounts. Meanwhile, the greenback benefits from the strong demand in the U.S. Treasuries market.
Still, the Swiss franc has been weakened by the central bank setting a cap on how high it can appreciate versus the euro. The move is designed to protect Swiss exporters.
The U.S. dollar. Powershares DB US Dollar Bullish Fund ETF (NYSEArca: UUP) tries to reflect the movements of the U.S. dollar against the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. UUP has $1.1 billion in assets and an expense ratio of 0.75%. The fund is relatively unchanged year-to-date, but up 1.8% over the last month.
“For those betting on a general U.S. dollar appreciation, this fund provides a better tool than single-currency funds because it tracks the performance of the U.S. dollar against six foreign currencies,” Rawson said in a research note.
The dollar index strengthened to 81.2 from 81.163 late Friday, according to the Wall Street Journal. Additionally, the dollar index also finished a 14-day winning streak, the longest since at least 1985, Friday.
The Japanese yen. Guggenheim CurrencyShares Japanese Yen Trust ETF (NYSEArca: FXY) tracks the currency movement of the Japanese yen against the greenback. FXY has $198.5 million in assets and an expense ratio of 0.40%. The fund is down 2.8% year-to-date.
Japanese yen has recently appreciated as Eurozone concerns and the rate of U.S. growth pushed investors back into the Japanese currency, the Wall Street Journal reports. FXY is 2.7% higher over the past month.