A Brief Overview of Recent Currency Performance

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 |  Includes: CNY, CYB, EU, EWJ, FXE, FXY, UDN, UUP
by: Tom Lydon

Some major currencies are very low right now. Case in point: the Chinese yuan. It certainly helped boost exports, but if the yuan strengthens, it doesn’t necessarily follow that China’s ETFs will take a hit.

This holds true for all currencies, really. Gary Gordon for ETF Expert has a few points illustrating that there isn’t always a direct relationship between a country’s currency strength and its economic growth:

  • The Japanese yen stayed strong throughout the financial crisis, hurting its export-dependent economy that has a low personal consumption and high savings rate. The yen has finally started to weaken, boosting ETFs like iShares MSCI Japan Index (NYSEARCA:EWJ).
  • The U.S. dollar gained 10% in the last four months, but that hasn’t hurt us any. In fact, the major market indexes have soared to new recent milestones.
  • The euro is in the dirt right now, but that’s not paying off much for the eurozone denizens are its economy.

All this to say: whether a currency is weak or strong, don’t buy, sell or make predictions about single-country ETFs based on that information alone. Consider the fundamentals and, most importantly, follow the trends.