To clear up that headline, it will not be U.S. dollar or euro
that are addressed here.
Even the Japanese yen will be skirted to some extend. There
are plenty of other currencies that can be accessed via ETFs that
could present opportunities to investors for the remainder of
2013 from both the long and short sides.
Some of the options presented here can be viewed as obvious
choices. Others are potential safe-haven alternatives to the U.S.
dollar. While it can be said that currency ETFs are not
necessarily as exciting as trading forex in the spot market, they
do give investors one more avenue for diversifying away from the
Of course that is assuming investors even want non-dollar
exposure. That could be a tough sell with the PowerShares DB US
Dollar Index Bullish (NYSE:
) up about three percent year-to-date. Still, there are some
compelling opportunities among forex ETFs to consider for the
rest of this year.
CurrencyShares Australian Dollar Trust (NYSE:
) The medium-term outlook for the Australian dollar is something
of an enigma wrapped in a riddle. As a commodity-based currency,
weakness for gold could weigh on the Aussie
As one of the so-called riskier currencies, the Aussie is
often used as a gauge of global risk appetite and prolonged
weakness in this dollar could be a negative sign of those hoping
for a true risk on rally.
Then again, risk associated with the Australian dollar can be
overstated. Yes, even the Reserve Bank of Australia has said the
dollar is overvalued and the strong Aussie is a legitimate
stumbling block for
equities in the world's 12th-largest economy
At the same time, Australia has an AAA credit rating and high
interest rates (3 percent) by the standards of the developed
world. The U.S. does not have an AAA credit rating and has low
interest rates. Same for Japan. Those factors explain, at least
in part, why the Australian dollar has been the best-performing
developed market currency against the greenback since the global
financial crisis and why global central banks continue to gobble
up the Australian currency.
As for FXA, a drop below support at $101 would be a sell
CurrencyShares Singapore Dollar Trust (NYSE:
) The CurrencyShares Singapore Dollar Trust debuted in February
and has only nudged higher by 0.11 since then, but there is some
potential appeal here. However, perhaps even more so than with
FXA, the CurrencyShares Singapore Dollar Trust represents a
For starters, Singapore has low interest rates and the central
bank there uses exchange rates over interest rate action as its
monetary policy tool of choice. The central bank recently pared
its 2013 inflation forecast to three to four percent from 3.5 to
4.5 percent, but first-quarter GDP there contracted 1.4 percent,
according to the Wall Street Jounral
Some market participants expect inflationary pressure to tick
higher in the second half of this year, but Singapore's dollar
does offer one important source of allure: The backing of the
city-state's AAA credit rating.
PowerShares DB G10 Currency Harvest Fund (NYSE:
) Amid Japan's weak yen policy, one that appears to finally be
working, and inflows to
, the carry trade is back. Ordinary investors that do not want to
execute their own carry trades in the forex market do not need to
fret because DBV is a de-facto carry trade ETF.
The $366 million ETF tracks an index that is "is composed of
currency futures contracts on certain G10 currencies and is
designed to exploit the trend that currencies associated with
relatively high interest rates, on average, tend to rise in value
relative to currencies associated with relatively low interest
rates," according to PowerShares.
While DBV can use the entire realm of G10 currencies, its
current holdings include long positions of 33.33 percent each in
the Australian and New Zealand dollars and the Norwegian krone.
DBV's short positions are 33.33 percent each allocated to the
euro, yen and Swiss franc. The ETF is up 4.4 percent
For more on ETFs, click
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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