How To Pick The Right Currency ETF

Currency ETFs are exchange-traded funds that focus its investments in local or foreign currencies, or a mix of both. Currency trading is quite common. However, many are apprehensive about it since the nature of FOREX appears to be highly volatile.

The value of a currency is largely dependent on a country’s fiscal state, its political situation, and its common state of affairs. In the event of calamities, currencies often take a hit as a result. But what makes a currency ETF a good investment? The main driving point in the rise and drop of currency value is totally different from those in the stock market. It is in a league of its own.

How To Pick The Best Currency ETF for You

  1. How much do you want to be exposed?

The nature of ETFs allows investors to gain exposure to a wide variety of sectors and types of assets. In choosing a currency ETF, take note of the underlying securities involved in the given fund. By considering currency ETF, you minimize the risks in case that specific stock-based investment fail. Pick a currency and be ready to bet on how well it can perform against other currencies.

In currency trading, you watch out for two or more other currencies and see how they fare against the US dollar. You either hope in favour of the dollar (long dollar strategy) or wish the dollar loses against others (short dollar strategy). Most currency ETFs are short dollar funds but there are top long dollar methods that many investors swear by as well.

  1. What is the best structure for this fund?

This is the general rule: you get total currency returns by combining spot exchange rates with the interest. There are 4 structures involved in currency trading: open-ended fund, commodity pools, exchange-traded notes and grantor trust.

  • Exchange-trade notes (ETN) are issued by a financial entity representing loose debt, wherein a bank offers to pay for returns from specified exchange rates and indexes.
  • Grantor trust designates investors as direct shareholders of in the basket of funds. In this case, investors get direct hold of foreign currencies inside a bank account.
  • Commodity pools, simply put, are funds collected to be invested in commodities and future contracts, with the aim of exposing the investors to underlying currencies.
  • Open-ended funds offer a more secure approach to trading that requires cash reserves and traded similar to mutual funds.

List of Available Currency ETFs in the US (as of August 25, 2017)

Symbol Name Total Assets (amounts in USD)
AYT iPath GEMS Asia 8 ETN $ 1,182,490.00
BZF WisdomTree Brazilian Real Fund $ 22,735,790.00
CEW WisdomTree Emerging Currency Fund $ 49,451,020.00
CNY Market Vectors-Renminbi/USD ETN $ 11,500,200.00
CROC ProShares UltraShort Australian Dollar $ 11,276,610.00
CYB WisdomTree Chinese Yuan Fund $ 38,004,700.00
DBV PowerShare DBG10 Currency Harvest Fund $ 43,234,580.00
DRR Market Vectors Double Short Euro ETN $ 15,239,700.00
ERO iPath EUR/USD Exchange Rate ETN $ 3,104,050.00
EUFX ProShares Short Euro $ 8,095,700.00
EUO ProShares UltraShort Euro $ 228,056,040.00
FXA CurrencyShares Australian Dollar $ 173,815,530.00
FXB CurrencyShares British Pound Sterling Trust $ 230,374,020.00
FXC CurrencyShares Canadian Dollar Trust ETF $ 188,440,100.00
FXCH CurrencyShares Chinese Renminbi Trust $ 7,372,360.00
FXE CurrencyShares Euro Trust $ 342,490,200.00
FXF CurrencyShares Swiss Franc $ 157,097,300.00
FXS CurrencyShares Swedish Krona $ 23,723,340.00
FXSG CurrencyShares Singapore Dollar Trust $ 3,612,950.00
FXY CurrencyShares Japanese Yen Trust $119,025,650.00
GBB iPath GBP/USD Exchange Rate ETN $ 4,241,400.00
ICI iPath Optimized Currency Carry ETN $ 1,937,210.00
INR Market Vectors-Rupee/USD ETN $ 1,338,460.00
JEM iPath GEMS Index ETN $ 809,640.00
JYN iPath JPY/USD Exchange Rate ETN $ 1,563,420.00
PGD iPath Asian & Gulf Currency Revaluation ETN $ 994,440.00
UDN PowerShares DB US Dollar Bearish Fund $ 40,125,030.00
ULE ProShares Ultra Euro $ 15,432,120.00
URR Market Vectors Double Long Euro ETN $ 2,581,380.00
USDU WisdomTree Bloomberg US Dollar Bullish Fund $ 138,939,060.00
UUP PowerShares DB US Dollar Bullish Fund $ 595,058,730.00
YCL ProShares Ultra Yen $ 6,149,740.00
YCS ProShares UltraShort Yen $ 140,682,480.00

*Source: ETF DB Website: (http://etfdb.com/type/currency/all) 

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How To Pick The Right Currency ETF