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Global Macro Investing, Part VI

Note: Indian investors need to check for compliance with FEMA rules and RBI guidelines on investment abroad, particularly so for any currency-related investments. The options presented below might not be feasible for an Indian resident.


The last part rounded out the section on currencies as an asset class. Now, let’s put that knowledge to use by looking at the various financial instruments available for playing in the currencies market. I’m not referring to currency futures and options – if you’re smart enough to trade those, you know a lot more than me about this. There are ways to participate in the fortunes of currencies just as the average investor participates in the fortunes of companies. It is as simple as buying and holding shares in a brokerage account.


Exchange Traded Funds (ETFs)


An ETF is an investment trust which holds the underlying asset and issues shares backed by the asset. The fund allows authorized participants to redeem shares for the asset, as well as grants shares in exchange for the asset. This arbitrage keeps the ETF share price in line with the value of the asset. The shares of an ETF are bought and sold just the same way as for regular companies.


Australian Dollar


Guggenheim CurrencyShares Australian (FXA) is an ETF that holds Australian Dollars. The fund’s performance reflects the performance of the AUD vs. the USD. It is an easy way to get exposure to the AUD.


Similarly, one can gain exposure to all the other major currencies.


Other Currencies

  • Euro – Guggenheim CurrencyShares Euro Trust (FXE)

  • Canadian Dollar – Guggenheim CurrencyShares Canadian (FXC)

  • Swiss Franc – CurrencyShares Swiss Franc Trust (FXF)

  • British Pound – Guggenheim CurrencyShares British (FXB)

  • Japanese Yen – Guggenheim CurrencyShares Japanese (FXY)

  • Swedish Krona – Guggenheim CurrencyShares Swedish (FXS)


For a complete list of the ETFs offered by CurrencyShares, visit https://currencyshares.com/home


There is another option, offered by EverBank, an online-only bank based in the US and insured by the FDIC (US bank deposit insurance).


The details can be found here: https://www.everbank.com/currencies


And for staying on top of the currency markets, simply subscribe to the Daily Pfenning (free) newsletter at http://www.dailypfennig.com/subscribe/


The newsletter takes its name from the Pfenning, a German coin which was quite valuable when it was introduced in the 9th century and ended up being the equivalent of a penny at its demise.


This part concludes the series on currencies.


Feel free to reach out to me at kashyap286@gmail.com or comment below.

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