Currency ETFs and ETNs

Multi Currency ETFs and ETNs List
(click on symbol for data and articles)

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)

Single Currency ETFs and ETNs List
(click on symbol for data and articles)

Australian Dollar
CurrencyShares Australian Dollar Trust (FXA)
ELEMENTS Australian Dollar (ADE)

Brazilian Real
WisdomTree Dreyfus Brazilian Real Fund ETF (BZF)

British Pound
CurrencyShares British Pound Sterling Trust (FXB)
ELEMENTS British Pound (EGB)
iPath GBP/USD Exchange Rate ETN (GBB)

Canadian Dollar
CurrencyShares Canadian Dollar Trust (FXC)
ELEMENTS Canadian Dollar (CUD)

Chinese Renminbi ("Yuan")
Market Vectors - Chinese Renminbi/USD ETN (CNY)
WisdomTree Dreyfus Chinese Yuan Fund ETF (CYB)

Euro
CurrencyShares Euro Trust (FXE)
ELEMENTS Euro (ERE)
WisdomTree Dreyfus Euro Fund ETF (EU)
iPath EUR/USD Exchange Rate ETN (ERO)

Indian Rupee
Market Vectors - Indian Rupee/USD ETN (INR)
WisdomTree Dreyfus Indian Rupee Fund (ICN)

Japanese Yen
CurrencyShares Japanese Yen Trust (FXY)
iPath JPY/USD Exchange Rate ETN (JYN)
WisdomTree Dreyfus Japanese Yen Fund ETF (JYF)

Mexican Peso
CurrencyShares Mexican Peso Trust (FXM)

Swedish Krona
CurrencyShares Swedish Krona Trust (FXS)

Swiss Franc
CurrencyShares Swiss Franc Trust (FXF)
ELEMENTS Swiss Franc (SZE)

What Are They?

• Currency ETFs (exchange-traded funds) track a singe foreign currency or basket of currencies by using foreign cash deposits or futures contracts. For the ETFs that use futures, excess cash is usually invested in high quality bonds, typically US Treasury bonds. The management fee is deducted from the interest earned on the bonds.
• Currency ETNs (exchange traded notes) are non-interest paying debt instruments whose price fluctuates (by contractual commitment) with an underlying currency exchange rate. Because they are debt obligations, ETNs are subject to the solvency of the issuer.

Why & How To Use Them

• Currency ETFs and ETNs are not particularly attractive for long term investors looking to build a diversified portfolio, because, unlike stocks, currencies may not trend up over time -- low-interest bearing cash is not a "productive" asset. Long term investors looking to diversify out of the US are generally better off buying foreign stock or bond ETFs.
• Currency ETFs and ETNs may be attractive to investors looking to hedge their exposure to the dollar or to "bet against" the dollar.
• Currency ETFs and ETNs can also be useful for non-investment purposes, such as hedging a transaction in a foreign currency.

What to Look Out For

• Currency ETFs tend to have fairly high annual expense ratios, and the high turnover due to the use of futures may lead to higher than average trading costs.
• An alternative to currency ETFs is simple foreign currency bank deposits. While they can't be managed as easily in a single brokerage account, the may pay higher interest rates than the yield on the currency ETFs.
• ETFs that hold futures contracts and Treasury bonds have different tax status than equity ETFs. Interest on bonds is generally passed through as ordinary income, while capital gains on the futures contracts are usually taxed as though 40% of the gains are short-term and 60% long term. Check carefully with an accountant.
• Currency ETFs that use futures may diverge significantly from their underlying currency. In contrast, currency ETNs should track the currency accurately.

Further Reading

• For discussion of currency ETFs versus ETNs, see Matt Hougan's iPath's New Currency ETNs vs. CurrencyShares ETFs: Room For Both?. See also Pause For Concern On Chinese Currency ETN (Gary Gordon).
• Discussion of the ETFs and ETNs themselves: Rydex's CurrencyShares ETFs: The Expensive Truth (Bryan Moore), Currency ETFs: Some Pluses and Minuses (Abnormal Returns), The New Currency ETFs Add Little For Investors (David Andrew Taylor), Move Over CurrencyShares: PowerShares Launches Two Currency ETFs (IndexUniverse), ELEMENTS Currency ETNs Aim to Outperform Comparable ETFs (Matt Hougan), Chinese, Indian Currency ETNs Launch (Matt Hougan), Barclays Launches a Carry-Trade Currency ETN (Murray Coleman).
• Discussion of investment strategies using these ETFs: Hedging a Weakening Dollar With Currency ETFs (Roger Nusbaum), Which Currency ETF is the Best Hedge Against the Dollar? (Roger Nusbaum).

This page is part of The Seeking Alpha ETF Selector which sorts ETFs by type, highlights how to use them and what to look out for, and provides links to articles that discuss key issues for investors.

Comments

[DavidJackson]

Roger Nusbaum made some really useful comments and corrections to me by email on this post. Those changes have now been incorporated. Many thanks, Roger.

Have we missed out any ETFs here? Or any Seeking Alpha articles that are important to understanding them? If so, please leave a comment and let us know!

[Ralph F]

Does Barclay's have plans to launch a currency ETN that tracks a basket of currencies instead of a single currency?

[DavidJackson]

We just added the ELEMENTS ETNs, which are soon to start trading. The article linked to in the "Further Reading" section by Matt Hougan comparing the ELEMENTS ETNs with the Barclays ETNs is outstanding.

[Frank Li]

Does anyone have any idea when we'll see some inverse currency ETFs, eg. that allow you to bet against the euro versus the dollar?

[DavidJackson]

We just added two new ETNs to this page: the Chinese Renminbi ETN and the Indian Rupee ETN. We also added a link in the Further Reading section to Matt Hougan's short but excellent article on them.

[YL]

I am very interested in one of the new ETNs, the Chinese RMB ETN which is now trading at $40.73....not sure how this product has been priced - its starting price on Monday was $40... There is no info available online in terms of the product structure and its pricing. Wanted to buy some but don't have the necessary info... can anyone help or have any idea in terms of the product pricing and structure / portfolio?

[tradealarm]

Is there any ETF/ETN for Brazilian real?

[DavidJackson]

Jerry, not yet, as far as I know.

[DavidJackson]

Update: We just added Gary Gordon's excellent article on the risks of the Chinese currency ETN to the Further Reading section.

[DavidJackson]

Update: We just added the new Barclay's Carry Trade ETF to the list, and Murray Coleman's article about it to the Further Reading section.

[DavidJackson]

Update: We just added the following new currency ETFs:
WisdomTree Dreyfus Chinese Yuan Fund (CYB)
WisdomTree Dreyfus Brazilian Real Fund (BZF)
WisdomTree Dreyfus Indian Rupee Fund (ICN)
WisdomTree Dreyfus Euro Fund (EU)
WisdomTree Dreyfus Japanese Yen Fund (JYF)