With Greece in such dire fiscal straits, the euro is faltering. Will it stay weakened? While few in Europe might be rejoicing about the state of their depressed currency, the mixed sentiment is an opportunity for ETF investors.
Greece may try to float a small bond offering, which comes on the heels of some kind of “good news” with regard to taxation and spending, remarks Jon Weisenthal for Business Insider. Weisenthal expects that speculators will be caught by surprise, the announcement will be timed to coincide with other “support” from the rest of the European Union, which could cause the euro to appreciate, and Greece would then dish out its debt offering.
For now, though, the euro is declining. While experienced currency traders might gravitate toward using a forex account to short the currency directly, the average currency trader may find it easier to use short euro ETFs, comments Ron for Benzinga.
One such option is the UltraShort Euro ProShares (NYSEArca: EUO). EUO tries to provide twice the daily inverse performance of the euro against the U.S. dollar. The reasoning goes that the euro is falling as a result of Greece and other E.U. countries are failing to service large public debts and may have to default.
If Greece were to be bailed out, the euro may gain some strength, but other members in the eurozone have an equally poor fiscal outlook. Countries like Portugal, Ireland and Spain may pose problems for the euro.
But wait a minute. Before you dive in and buy a short ETF, understand how they work, what the risks are and decide whether they’re actually right for you.
- Market Vectors Double Long Euro ETN (NYSEArca: URR)
- Market Vectors Double Short Euro ETN (NYSEArca: DRR)
- Ultra Euro ProShares (NYSEArca: ULE)
- CurrencyShares Euro Trust (NYSEArca: FXE)
- WisdomTree Dreyfus Euro (NYSEArca: EU)
Read the disclaimer, as Tom Lydon is a board member of Rydex|SGI.
Max Chen contributed to this article.
