Even casual followers of global currencies would be hard pressed not to take note of some of the dislocations that have been occurring in the past several months, seemingly accelerating in recent days amid the announcement of China’s “Stealth QE” program and the U.S. FOMC’s rate decision and rhetoric yesterday.
For example, the largest Currency based ETP, UUP (PowerShares DB U.S. Dollar Index Bullish, Expense Ratio 0.80%) staged a huge intraday rally to trade at its highest level since the summer of 2013, and the bulk of this move has occurred aggressively (and has been documented here on several occasions) beginning in early July.
The Dollar wasn’t the only one in motion after the FOMC rate decision yesterday, as FXY (CurrencyShares Japanese Yen, Expense Ratio 0.40%) plunged on heavy trading volume, and reminded us that this fund that only has about $68 million in it, is watched by at least someone. The fund has seen large outflows all year long, losing more than $108 million year to date as the Yen has weakened globally, seeming to accelerate in the past few months.
The Euro did not fare much better yesterday, with FXE (CurrencyShares Euro, Expense Ratio 0.40%) trading at fresh new 2014 lows before recovering somewhat today. We remind folks that EUO (CurrencyShares UltraShort Euro, Expense Ratio 0.95%) remains more relevant currently than the “long” product tied to the Euro in terms of asset size, as this fund has about $477 million in assets under management, adding a small $3 million year to date. Meanwhile, the perpetually falling FXE, or at least it seems that way, can only muster about $191 million in AUM at this point in time.
As is the case with EUO/FXE, the “Short” Yen ETF product, YCS (ProShares UltraShort Yen, Expense Ratio 0.95%) has about $419 million in AUM which is significantly more than the “long” FXY, making it the third largest Currency based ETP in the U.S. landscape period.
The Yen and the Euro are not alone in their fall, as we have seen an uptick in interest in the even smaller BZF (WisdomTree Dreyfus Brazilian Real Fund, Expense Ratio 0.45%) which has been negatively impacted by the FOMC’s rate forecast yesterday and this $33 million fund saw good trading action yesterday.
Also of note is the weaker FXA (CurrencyShares Australian Dollar, Expense Ratio 0.40%) which is reasonably prominent with $257 million in AUM and FXF (CurrencyShares Swiss Franc, Expense Ratio 0.40%) which has north of $209 million in AUM.
Of course we cannot forget the British pound amid the Scotland independence vote, and FXB (CurrencyShares British Pound, Expense Ratio 0.40%) has seen a huge uptick in trading interest in the past week or so as well as a nice rally to current levels. The fund itself merely has $63 million in assets however.
Today, we see fresh headlines about the South African Rand tumbling to 7 month lows but we unfortunately do not see a way to play the Rand via an ETF/ETN (although there used to be at least two products that shuttered due to lack of interest). Volatility, which is what we have had and continue to have in global currencies, generally brings trading and interest, so perhaps ETF model building in the Currency ETP space will take on a new life given the new global surge of currency volatility.
CurrencyShares British Pound Sterling Trust ETF
For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.
Street One Financial is an educational/research firm utilizing the Broker Dealer services of Precision Securities, a FINRA registered Broker/Dealer.