By Dave Nadig

It’s one thing to love a product for its innovation, but another to blanket the world with that love without highlighting the real problems.

A group of Asian nations gathered for a summit in Cha-am, Thailand this past weekend to discuss forming a bloc similar to the EU. To the extent that necessity is the mother of invention, a statement by Thai Prime Minister Abhist might best sum up the ethos behind the gathering.

“The old growth model, where, simply put, we have to rely on consumption in the West for goods and services produced here, we feel will no longer serve us as we move to the future.”

Profligate U.S. fiscal and monetary policies have weakened the dollar and strengthened foreign currencies. With the proper application of currency ETFs, an investor may be able to capitalize on foreign markets.

Now that the U.S. dollar has hit nearly a 12-month low, you could be wondering how to best capitalize. Foreign stocks do not offer the diversification of currency investing, since stocks are usually correlated to U.S. equities, remark Katie Benner and Beth Kowitt for CNNMoney.

Currencies and the ETFs that track them are getting an increasing amount of attention these days as the U.S. dollar zigs and zags and inflation becomes a potential threat, while other currencies gain relative to it.

The Forex Market

Investor interest in currencies is increasing.

The currency market dwarfs all other markets, trading over $4 trillion per day. The US Dollar dominates that trading, and the big four are the Dollar, the Euro, the Yen and the Pound. The Australian Dollar, the Canadian Dollar and the Swiss Franc make up the second rank by volume.

The number of exchange-traded products on Deathwatch decreased for the second month in a row. It would be premature to declare that the peak is now behind us, because I would not be surprised to see additional recession-related declines in trading activity for some ETFs in the months ahead. This month’s list contains 155 names, down from 162 last month and down from the record high of 171 for the March list. The current list consists of 114 ETFs and 41 ETNs that are at least six months old and failed to have an Average Daily Value Traded (ADVT) of at least $100,000 during April.

Elements Ben Graham Large Cap Value ETN (BVL) heads up the list this month with a pathetic 38 shares traded per day - an ADVT of just $242. Closer inspection reveals that BVL only traded on five separate days in April, and its highest-volume day was just 200 shares. The two other Elements Ben Graham products are on the list as well. The second entry on the list is Barclays GEMS Asia 8 ETN (AYT) which only traded one day last month. A grand total of 400 shares traded hands, all on April 7.

The number of exchange-traded products on Deathwatch fell to 162 from the record high of 171 a month ago. This is the first decline since we began keeping count last August.

The current list consists of 121 ETFs and 41 ETNs that are at least six months old and failed to have an Average Daily Value Traded (ADVT) of at least $100,000 during the month of March.

Having been burned by premature investments in ailing US companies, America's three biggest creditors are teaming up in order to push their agenda for a new financial world order since most European and American banks are trending towards bankruptcy, only held alive by irresponsible government guarantees these days.

These tables show the 1-week, 4-week, 13-week, 26-week and 52-week returns for a wide spectrum of asset types.

They, and other tables, are updated each Saturday morning on our site. These tables are for the week ended November 21, 2008.

There is some talk in the market about Malaysia re-establishing the ringgit peg.  We downplay the notion, and do not think it has the support of government policy-makers since central bank Governor Zeti and new Finance Minister Najib both spoke out strongly against the peg today.  Zeti said that repegging would be harmful to the economy and that a floating exchange rate provides stability, while Najib said the authorities have no intention of repegging.  Najib just last week swapped the post of Finance Minister for Defense Minister with Prime Minister Abdullah Badawi, and so Najib is clearly signaling policy continuity.  Abdullah also agreed to hand over the leadership reins to Najib by June 2010, but left open the possibility of an even earlier date.

Note that newswires are reporting that the proposal to repeg was put forth by none other than former PM Mahathir, who instituted the peg during the Asian crisis. Mahathir's proposal was backed by Minister of International Trade and Industry Yassin. Mahathir and his followers are locked in a power struggle with the Abdullah faction, with the latter coming under fire for significant losses in elections earlier this year.  Mahathir has been calling for Abdullah to step down.  After all, it was Abdullah who scrapped the peg back in July 2005.  Yassin has also called for Abdullah to step down, which cements our view that it was a calculated political move to undermine confidence in Abdullah.

I have been following developments in currency exchange traded products for a few years. It is a new field,  (Rydex introduced the first currency ETF in December, 2005), so it lacks a long history of action/reaction that helps analysts put it all together. And I confess that I haven’t put it all together yet. One of the things that puzzles me is the role Barclays Capital is playing and will play as the market matures. They dominate the equities and bond ETF business,  yet they are in fourth place in the currency world, behind Rydex , PowerShares, and Wisdom Tree—all relative newcomers to the exchange traded market.

It’s understandable that no firm can be dominant in all fields. Specialists are going to win some of the niche battles, and make no mistake,  currency investing, with just over $5 billion in assets, is a niche. But I am still puzzled by their performance against the relative lightweights that now dominate currency products. 

On Thursday, September 4 Barclays Capital launched the first Exchange Traded Note [ETN] to provide investors access to a basket of eight emerging Asian currencies. The Barclays Global Emerging Market Strategy [GEMS] Asia 8 Index ETN (AYT) trades on the NYSE-Arca and includes the following eight currencies: the Indonesian rupiah, the Indian rupee, the Philippine peso, the South Korean won, the Thai baht, the Malaysian ringgit, the Taiwanese dollar and the Chinese yuan.

Barclays Global Investors is listing an Asian currency-focused ETN. The note will give investors access to new currencies previously unavailable to ETF and ETN investors: the Philippine peso, Chinese won, Indonesian rupiah, Thai baht, Malaysian ringgit, and the Taiwanese dollar. The new ETN is called Barclays GEMS Asia 8 (AYT).

The goal of the fund’s index is to replicate a diversified, multi-national money market strategy in eight Asian emerging markets. According to Murray Coleman for Index Universe, this is the third such dividend-paying currency exchange-traded product on the market.

Barclays Capital announced today, Sept. 4, a new ETN that bundles eight Asian currencies tied to their GEMS Asian 8 Index.   It trades under the symbol AYT. Similar to their GEMS Index, which I covered in my August 13 article, "Carrying the Dollar Upstream", the new ETN narrows the focus from a global perspective to the Asian emerging markets.

The currencies included are:

Barclays Global Emerging Market Strategy [GEMS] Asia 8 Index ETN (AYT)
Barclay's iPath Optimized Currency Carry Exchange Traded Note (ICI)
PowerShares DB G10 Currency Harvest Fund (DBV)
PowerShares DB US Dollar Bullish Fund (UUP)
PowerShares DB US Dollar Bearish Fund (UDN)
WisdomTree Dreyfus Emerging Currency Fund (CEW)