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Currency ETFs - Alternate Way to Protect Yourself from Falling US Dollar(FXA, FXB, FXC, FXE)
The US Dollar Index hit an all-time low on Friday. In this decliningdollar environment, you need to protect your investments againstcurrency erosion. In a previous blog post, I mentioned investing in foreign sharesto protect yourself from the falling dollar. Another less riskyinvestment approach are currency ETF's. Some people may ask, why notjust trade in the forex markets? While you get more leverage tradingin the forex markets, the volatility that currency markets have couldcause a margin call which would exit you out of your position beforeyou want to.
Rydex Investments offers a series of currency ETF's. The CurrencyShares Australian Dollar Trust (Symbol: FXA), CurrencyShares British Pound Sterling Trust (Symbol: FXB), CurrencyShares Canadian Dollar Trust (Symbol: FXC), and the CurrencyShares Euro Trust (Symbol: FXE)are my preferred currency ETF plays. Those currencies should continueto appreciate against the US Dollar plus you will earn monthlydividends on these funds as well (as a function of the interestearned by the funds minus fees and expenses).
But if you feel the US Dollar will make a strong comeback, you can also short these ETFs as well.
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