Using Currency ETFs for Forex Investing

By Mark Nicholas – Investment in the foreign currency market, more generally called as forex trading, used to work as off-limits to of retail traders. Until recently, forex trading was kept for experts at huge investment financial institutions, protect money plus central banks.

Although now, any trader who really wants to understand ways to take part in the foreign currency market. Of course, that doesn’t mean forex trading system is meant for all.

To make sure, there are compelling reasons to think about forex trading for investment option. Firstly, the market is not closed twenty four hours a day, seven days a week, enabling someone to buy and sell while the Asian markets open if you’re thus inclined. Next, forex broker agents recommend a substantial amount of leverage, meaning you are able to start an account with simply some 100 bucks plus have the authority to trade a much larger amount of cash. Third, the forex market is the most liquid financial market in the world. Daily an abundance of funds changes hands in this market than the entire world’s equity plus bond markets combined.

Although this really is often known as a trader’s market and not all investor is a trader. Luckily, there’s a approach to obtain your forex fix without being chained with a computer. Exchange-traded funds are the best way meant for investors to achieve contact with many currencies without needing to trade considering the every day volatility of the forex market. Let’s go looking at a few of the significant forex Exchange-traded funds investors must know about.

PowerShares DB US Dollar Index Bullish ETF (NYSE: UUP) With the forex world, the dollar still rules the roost. That makes UUP essential – know among currency Exchange-traded funds, from it mirrors the dollar’s performance. UUP is one of most liquid currency Exchange-traded funds on the market with normal each day buying and selling quantity of over 4.7 million shares. This is an important consideration since many currency Exchange-traded funds are lightly traded, even a few that track most important currencies.

UUP tracks the U.S. Dollar Index, measuring the dollar’s strength in contrast to the euro, the British pound, the Japanese yen, the Canadian dollar, the Swedish krona and the Swiss franc. Buyers also needs to be alert of UUP’s bearish equivalent, the PowerShares DB US Dollar Index Bearish ETF (NYSE: UDN), if a quick dollar place is most appropriate.

CurrencyShares Euro Trust (NYSE: FXE) The euro, employed by 16 European nations with financial giants France as well as Germany, is the next most heavily traded currency following at the U.S. dollar. The euro is seen as a dangerous asset than either the dollar otherwise yen, so when the market’s appetite for risk is high, the euro in general outperforms other most important currencies.

The other holds true too: traders flee most unstable currencies at the time risk appetite wanes. Luckily, FXE has a well-liked bearish counterpart that should also be on your list of currency ETFs: The ProShares Ultra Short Euro ETF (NYSE: EUO).

WisdomTree Dreyfus Emerging Currency ETF (NYSE: CEW) Investment in rising market equities may be difficult , but investing emerging market currencies can be downright risky. It can be probably better for most investors to have exposure through an emerging currency ETF such as CEW. CEW invests in various currencies that can be considered conservative emerging market plays, such as Brazilian real, Chinese yuan plus Indian rupee. However CEW’s other constituents, including Chile, Hungary, Israel, Malaysia and Mexico, form this an ETF worth a look for all those eager to include considerable risk to their portfolios.

PowerShares DB G10 Currency Harvest ETF (NYSE: DBV) DBV focuses exclusively on developed market currencies. DBV is comprised of the futures contracts in 10 different currencies, together with the euro, yen, Australian dollar, Canadian dollar, pound, franc plus Norwegian krone. Note that DBV does not calculate the strength of U.S. Dollar relative to its other holdings. Rather, the Dollar is in basket of ten currencies tracked by DBV.

CurrencyShares Australian Dollar Trust (NYSE: FXA) The Australian currency is generally known as a commodity currency, which means its value has a strong correlation to the price of commodities – in this instance gold. History has revealed that while gold rates move higher, the Aussie dollar typically follows in step. Which means traders know how to indirectly profit exposure to gold through having FXA. Another reason to consider FXA is the general keenness of Reserve Bank of Australia to raise rates of interest – superb news for investors holding Australian dollars.

CurrencyShares Canadian Dollar Trust (NYSE: FXC) The Canadian dollar is one more commodity currency. Also known as loonie, the Canadian dollar has a historical correlation to crude oil costs since Canada is one of major crude producers in the world. Actually, the Canadian oil sands region is believed to carry one of the leading oil reserves outer the Middle East. Oil has a major influence on Canada’s economy plus, in turn, on the value of loonie. Consider FXC as a backdoor play on oil rates, especially as oil companies may be planning to move operations from the Gulf of Mexico since offshore drilling becomes more regulated.

About the Author

If you’re feeling anxious about currency trading, then I suggest you to learn how to use currency ETFs for forex investing which help you to make profits in different foreign currencies. Gain a FREE Weekly Wealth Letter & learn how to use currency ETFs which help you to make gains in forex investing.