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Amid growing political uncertainty in Ireland after strong demands by the Irish Green Party for a general election, analysts now have expressed doubts whether it's possible for the government to pass its new proposed budget on Dec. 7 as scheduled. According to analysts at Capital Markets, the dollar initially fell against the euro to 1.3786 following news of an agreed upon 90 billion euros to resolve Ireland’s banking and budget crisis. However, political uncertainty neutralized any Irish bailout gains given the gains were quickly wiped away as it fell to the low 1.36s following rising concerns that Ireland’s debt crisis might spread to other eurozone countries, as default insurance costs for Portugal and Spain rose earlier this morning.

EUR - The Great Fall: EUR has weakened 5% since the Fed announced QE2 on Nov. 3, falling from a high of 1.4282 on Nov. 5 to yesterday's level of 1.3580. Most of this weakness has been EU centric, with the escalation of concerns over Ireland. The euro has continued to slide while the U.S. dollar has rallied, helped on its way by an exchange of artillery fire between South and North Korea that has seen the dollar race up against the yen.

Euro Trends: Meanwhile, analysts at Duetsche Bank have said that despite all the Irish concerns, the single currency appears quite resilient; granted, it has been falling for a week, but only marginally. This pattern suggests the presence of a long-term buying interest, especially given the eurozone’s current circumstances. We see the euro in consolidation, although the risk for further depreciation to 1.3550/60 still exists.

Euro ETFs to Watch Out For


Rydex CurrencyShares Euro Currency Trust (NYSEARCA:FXE): The EUR/USD exchange rate is a foreign exchange spot rate that measures the relative values of two currencies, the euro and the U.S. dollar. FXE Tracks: Euro Index. Expense Ratio: 0.40%.

Short Euro ETFs:

ProShares UltraShort Euro (NYSEARCA:EUO): ProShares UltraShort Euro seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the U.S. dollar price of the euro. EUO Tracks: Euro (-200%) Index. Expense Ratio: 0.95%.
Market Vectors-Double Short Euro ETN (NYSEARCA:DRR): As the index is two-times leveraged, for every 1% weakening of the euro relative to the U.S. dollar, the level of the Index generally will increase by 2%, while for every 1% strengthening of the euro relative to the U.S. dollar, the index will generally decrease by 2%. DRR Tracks: Double Short Euro Index. Expense Ratio: 0.65%.

Long Euro ETFs:


ProShares Ultra Euro (NYSEARCA:ULE): ProShares Ultra Euro seeks daily investment results, before fees and expenses, that correspond to twice (200%) the U.S. dollar price of the euro. ULE Tracks: Euro (200%) Index. Expense Ratio: 0.95%.
Market Vectors-Double Long Euro ETN (NYSEARCA:URR): As the Index is two-times leveraged, for every 1% strengthening of the euro relative to the U.S. dollar, the level of the index will generally increase by 2%, while for every 1% weakening of the euro relative to the U.S. dollar, the index will generally decrease by 2%. URR Tracks: Double Long Euro Index. Expense Ratio: 0.65%.

The Korea Conflict:
North Korea fired dozens of artillery shells at a South Korean island, setting buildings on fire and prompting a return of fire by the South, Seoul's military and media reports said. Tensions between the two Koreas have remained high since the sinking in March of a South Korean warship in which 46 sailors died. Seoul blamed a North Korean torpedo, while Pyongyang has denied any responsibility. The countries' western maritime boundary has long been a flash point between the two Koreas. The North does not recognize the border that was unilaterally drawn by the United Nations at the close of the 1950-53 Korean War.

The North Korea-South Korea political issue is much more than an economic concern for the two nations and, if things get out of hand, it might mean a bigger crisis both financially and politically across the globe.
The heightened risk in Eastern Asia is driving a surge in U.S. Treasuries as a safe haven for investors. The U.S. dollar rose broadly after North Korea fired artillery at a South Korean island, sending investors in search of safety and putting geopolitical risk alongside Europe's debt crisis as reasons to play it safe to the year-end.

ETFs Investment Options For The U.S. dollar include:

PowerShares DB USD Index (NYSEARCA:UDN): The index is a rules-based index composed solely of short USDX futures contracts. The USDX futures contract is designed to replicate the performance of being short the U.S. dollar against the following currencies: Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.

Expense Ratio: 0.40%

PowerShares DB USD Index Bullish (NYSEARCA:UUP):
The index is a rules-based index composed solely of long USDX futures contracts. The USDX futures contract is designed to replicate the performance of being long the U.S. dollar against the following currencies: Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.

Expense Ratio: 0.50%

Disclosure: No positions
Source: Forex Market Pulse: Irish Uncertainty, Korean Conflict Drives U.S. Dollar