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Jim Trippon is a certified genius, a member of MENSA, and the epitome of the “Overachieving Entrepreneur.” He’s an internationally renowned and globally experienced investment expert, dedicated to finding undervalued, “under the radar” investments for his worldwide clients and subscribers. He... More
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Global Profit$ Alert
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Stay Rich Forever: Retirement Planning Secrets of Millionaires and How They Can Work For You!
  • Taking The Multi-Country Approach To Currency ETFs 0 comments
    Jul 11, 2011 7:01 AM | about stocks: VWO, EEM, FXA, DBV, CCX, CEW
    Last week, I touched on some of the basic concepts involving foreign currency ETFs and for the purposes of simplicity, I opted to focus more on examples that highlighted single-country ETFs. Single-country currency ETFs are a stark departure from multi-country equity ETFs, particularly when compared against emerging markets ETFs.

    For example, the Vanguard MSCI Emerging Markets ETF (NYSE: VWO) and the iShares MSCI Emerging Markets Index Fund (NYSE: EEM) are the two biggest emerging markets ETFs as ranked by assets and both funds offer exposure to multiple countries.

    Obviously, when an investor buys an ETF like the CurrencyShares Australian Dollar Trust (NYSE: FXA), that ETF solely offers exposure to the Australian dollar. FXA tracks the Aussie dollar and that's that, but for investors looking to get exposure to multiple currencies under the umbrella of one ETF, rest assured, there's an ETF for that. Actually, there are several and I'll show you a few of my favorites today.

    1. PowerShares DB G10 Currency Harvest ETF (NYSE: DBV)

    Consider DBV the conservative way to execute the carry trade. In a carry trade, a forex trade will typically borrow a low interest-rate security such as the U.S. dollar or Japanese yen to purchase a high interest-rate currency like the Aussie dollar. The profit potential is the interest rate differential between the two currencies.

    The way DBV works is pretty simple. At any one time, the ETF is long the highest interest-rate G10 currencies and short the lowest interest-rate members of the group. This objective is accomplished by using futures contracts, hence the 0.75% expense ratio, but DBV is still sound a bet for those looking to employ a carry trade without the risk of doing so directly in the forex market.

    1. WisdomTree Commodity Currency Fund (NYSE: CCX)

    If you have ever heard the term "commodity currency" and become confused, there's no need to be. What this means is a currency whose movements share an intimate correlation to a particular commodity. The Aussie and Canadian dollars are two prime examples. Australia's dollar has been known to share an intimate correlation to gold while the same can be said of Canada's "loonie" and oil.

    CCX offers exposure to those currencies and others that share the commodity currency label such as the Brazilian real, the Russian ruble, the New Zealand dollar and the South African rand among others. Rather than directly shorting dollars when commodities are on the upswing, CCX gives investors another way of participating in the upside offered by gold, oil and related fare.

    1. WisdomTree Emerging Currency Fund (NYSE: CEW)

    CEW is like EEM or VWO in that offers exposure to an array of emerging markets currencies, but that's just one reason to put this ETF on your list of candidates for forex exposure. Trading exotic currencies in the forex market can be costly because of wide bid/ask spreads, but investors can avoid that problem with CEW.

    More importantly, it has become clear that many emerging markets have begun to realize that they must facilitate domestic consumption rather than depending on exports to drive their economies. That means centrals banks in emerging markets are apt to allow their currencies to appreciate. Don't just take my word for it. Pimco recently said as much.

    Click HERE to learn more about the ETF Profit Report - An ETF Trading Service For Serious ETF Investors
    Here's why you don't have to worry about the "fine print" anymore...

    There can be some really nasty surprises in store for you when you buy and sell ETFs.

    Remember, although ETFs combine the best of both worlds of stocks and mutual funds – they can act totally different from each in real life.

    Those differences are usually spelled out in the "fine print" of the ETF's prospectus.

    Fun reading? Not hardly.

    To get more details on the ETF service recently voted "The Most Accurate in America", tap on the link below...

    Don't Let Me Make These Costly Mistakes When Buying And Selling ETFs!

    For more information and archived issues, visit http://www.globalprofitsalert.com

    Global Profits Alert (GPA) is published by Trippon Financial Research, Inc. a financial media organization with offices in the United States, Hong Kong and Mainland China. GPA is written by Jim Trippon in conjunction with George Wolff, Sunny Wang, Todd Shriber, Kelley Damiani and J. Daryl Thompson.

    Would you like to republish this article? Global Profits Alert issues can be republished, as long as the republished issues contain the name of the author(s) and the following short paragraph:

    This information was brought to you by GlobalProfitsAlert.com, a publication of Trippon Financial Research, Inc. GlobalProfitsAlert.com publishes information on Investing in the China stock market and emerging markets, dividend stock and income investing, exchange traded funds (ETFs), green energy stocks, technology stocks, global market trends and other investment information. To view archives or subscribe, visit http://www.globalprofitsalert.com

    Stocks: VWO, EEM, FXA, DBV, CCX, CEW
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