Beginners Guide to Currency ETFs

Exchange Traded Funds (ETFs) have become a very popular form of investing over the last decade. Trading like stocks ETFs have allowed investors to take positions in once restricted investments such as indices, sectors, commodities, and even international currencies and trends with lower management fees than mutual funds.

In recent years this offering has expanded to incorporate leveraged bets through Ultra ETFs and most recently Triple Leveraged ETFs. Some investors are now crafting strategies based solely on ETF investing.

Sticking with the international focus though this article will breakdown the most popular currency ETFs.

International Currency ETFs

There are a handful of  ETFs available for investing in currencies around the world. Personally we recommend the Rydex Investments ETFs as they are the most liquid:

  • Australian Dollar Trust (FXA)
  • British Pound Sterling Trust (FXB)
  • Canadian Dollar  Trust (FXC)
  • Euro Trust (FXE)
  • Japanese Yen Trust (FXY)
  • Mexican Peso Trust (FXM)
  • Russian Ruble Trust (XRU)
  • Swedish Krona Trust (FXS)
  • Swiss Franc Trust (FXF)

As of this post inverse versions (betting that the currency will go down) do not currently exist. To short the currency simply short the appropriate long ETF. Ultra ETF (2x) versions are also not available. All the above ETFs have a yearly expense ratio of .4%.

The hottest ETF right now is the Japanese Yen Trust (FXY) which had a fantastic run heading into late 2008 and here in early 2009 is still near all-time highs.

And for investors who want a more aggressive approach there is always the PowerShares DB G10 Currency Harvest Fund (DBV). DBV attempts to hold long futures positions in the three currencies with the highest interest rates while being short the three currencies with the lowest interest rates.

The U.S. Dollar

As for investing in the US dollar itself the US Dollar Long (UUP) and the US Dollar Short (UDN) are available through Powershares.

For those bearish the US dollar previously here on the site we have discussed 5 ETFs that profit from a weak dollar as an alternative to simply going long UDN.

Further Reading

For more ETF ideas consider the following posts:

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