Exchange traded funds, commonly referred to as ETFs, are investment funds that are traded on a stock exchange. Investors have a wide variety of ETFs from which to choose including those that track a major market Index, target gold or track a basket of foreign currencies. Currency ETFs provide investors with exposure to a particular currency or a basket of currencies, allowing access to multiple foreign currencies.
In 2005, Rydex SGI launched CurrencyShares Euro Trust (NYSE:FXE), the first currency exchange-traded fund. Since then, there has been significant growth in the entire currency ETF market, with assets of all funds now totaling more than $6 billion. Approximately 40 funds are now available that offer investors currency exposure.
The largest of the currency ETFs is the PowerShares DB U.S. Dollar Index Bullish (NYSE:UUP) with $1.05 billion in net assets. Incidentally, an advantage in trading ETFs is that they can be shorted, so investors could actually short the bullish fund if they felt the dollar was headed down. The fund invests by going long USDX futures contracts (to replicate the performance of being long the U.S. dollar against the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc).
The above article is written in part by author Jean Folger who writes at http://financialedge.investopedia.com .
Anthony DiChi,
Your friend in Forex Currency Trading, FX Information and Forex News at TradeCurrencyNow