Momentum is squarely behind the dollar amid the Omicron variant, but diversified exposure to international currencies is available in the Invesco DB G10 Currency Harvest Fund (DBV).
As various countries deal with the latest COVID-19 variant, the notion is that 2022 could bring more growth once the effects of the pandemic dissipate. That said, these countries’ local currencies should gain strength as economies improve and more central banks raise rates.
When fears of the Omicron variant dwindle, a risk-on sentiment could push currencies higher against the dollar.
“The dollar edged higher against a basket of currencies on Thursday, but its gains were capped as easing fears of fallout from the Omicron coronavirus variant supported higher risk currencies such as the Australian dollar and British pound,” a U.S. News World Report article says, noting that most major currency pairs were range-bound heading into Christmas.
“We think the majors are liable to remain more or less range bound over the holidays,” said Shaun Osborne, chief FX strategist at Scotiabank.
Diversified Exposure to Foreign Exchange Currencies
DBV seeks to track changes, whether positive or negative, in the level of the Deutsche Bank G10 Currency Future Harvest Index™ — Excess Return (DB G10 Currency Future Harvest Index ER or Index) plus the interest income from the fund’s holdings of primarily U.S. Treasury securities and money market income less the fund’s expenses. The fund is designed for investors who want a cost-effective and convenient way to invest in currency futures.
The index is composed of currency futures contracts on certain G10 currencies and is designed to exploit the trend of currencies associated with relatively high interest rates, on average, tending to rise in value relative to currencies associated with relatively low interest rates. The G10 currency universe from which the index selects currently includes U.S. dollars, euros, Japanese yen, Canadian dollars, Swiss francs, British pounds, Australian dollars, New Zealand dollars, Norwegian krone, and Swedish krona.
DBV is also an ideal tool for traders who want to bet on the short-term movements of international currencies as a whole. The fund seeks to track the index, which is designed to reflect the return from investing up to a 2:1 leveraged basis (immediately upon re-balancing, which may then increase or decrease) in long currency futures positions for certain currencies associated with relatively high yielding interest rates and in short currency futures positions for certain currencies associated with relatively low yielding interest rates.
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