ETF Expert: All Foreign Currency ETFs Show Long-Term Uptrends
22 July 2009 at 3:22 pm by Gary Gordon
The U.S. dollar may be struggling worse than anyone would like to admit. While I certainly don't think the world is heading for an alternate reserve currency, it's hard to debate the probability of significant devaluation.
Of 14 "pure play" currency ETFs, only the PowerShares DB Dollar Bullish Fund (UUP) is below a long-term moving average. The 13 other currencies? Each of their respective ETFs are above a 200-day trendline. What's more, most have year-to-date gains.
| Currency ETFs Through 7/17/2009 | |||||||
| YTD | % Above 200-Day | ||||||
| WisdomTree Chinese Yuan (CYB) | 2.1% | 0.7% | |||||
| CurrencyShares Japanese Yen Trust (FXY) | -4.3% | 1.1% | |||||
| CurrencyShares Swedish Krona Trust (FXS) | -0.4% | 1.4% | |||||
| CurrencyShares Mexican Peso Trust (FXM) | 1.8% | 1.4% | |||||
| WisdomTree Indian Rupee (ICN) | 3.0% | 3.3% | |||||
| CurrencyShares Swiss Franc Trust (FXF) | -1.5% | 5.2% | |||||
| Currency Shares Euro Trust (FXE) | 0.8% | 5.7% | |||||
| CurrencyShares British Pound Sterling (FXB) | 11.9% | 6.7% | |||||
| CurrencyShares Canadian Dollar Trust (FXC) | 8.6% | 7.4% | |||||
| WisdomTree New Zealand Dollar (BNZ) | 11.2% | 9.7% | |||||
| CurrencyShares Australian Dollar Trust (FXA) | 12.5% | 13.6% | |||||
| WisdomTree South African Rand (SZR) | 21.2% | 14.4% | |||||
| WisdomTree Brazilian Real (BZF) | 17.9% | 18.8% | |||||
Many believe that the U.S. dollar will weaken further. One of the biggest reasons is the weakness of the American consumer. A weak consumer means an anemic U.S. economy. And if the U.S. economy continues to represent less of the total global output, the value of the U.S. dollar may become less critical to the world at large.
What's more, U.S. policy makers actually want U.S. goods to be cheaper; they want foreign buyers to purchase more of what we produce. Then there's the reality of the monstrous U.S. budget deficit — one that's so large, we must issue more and more treasury bonds. This too devalues a country's currency.
How can we protect a portfolio and/or profit from the trend? One of the ETFs above can be good medicine. For instance, it's not surprising that resource rich nations like South Africa and Brazil have seen significant appreciation in 2009. (Note: The only reason that the Chinese yuan stays near the dollar is the Chinese government's determination to peg its currency to ours… for now!)
Commodities are another reasonable measure of protection. The PowerShares DB Total Commodity Index (DBC) tends to appreciate when the dollar goes down. Look at what gold, oil and other metals have done over the last decade.
Foreign stocks and foreign treasuries may also do the trick. (Review "U.S. Treasury Bonds Are in A World of Hurt.")
If you'd like to learn more about ETF investing… then tune into "In the Money With Gary Gordon." You can listen to the show "LIVE", via podcast or on your iPod.
Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.
