Author Topic: What to look for in Commodity Currency ETFs  (Read 3466 times)


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What to look for in Commodity Currency ETFs
« Topic Start: March 19, 2016, 05:17:04 PM »
The global market place has become increasingly one of extremes of panics of greed and fear. Lets just take the first few months of 2016. We started off by record lows across the board in currencies, commodities and their interrelationship. It was set off by continued concerns over China in a flight to safety (perceived at least).

Throw in Japan, Europe and the US it was dire times. Fast forward two months and we have seen 10-50% bounces in these then 'worthless' risk assets. Crude oil is up 50% since these lows for example.

What has changed, of course little, it is perception that changes. The world has still really not improved greatly in many sectors since 2008.  Bulls live in fear of missing out while bears fret at the loss of it all. That my friends is what makes markets!

So what do you do to take advantage of these over reactions? If you don't have access to direct foreign exchange commodities or futures. Or simply don't want the leverage of these markets. One avenue, which is a good way to capture the overshoot as these tend to overshoot more because of the double affect of stock bearishness or bullishness amplified by the underlying asset.

Currency commodities, that is countries whose currencies reflect their dependence on commodities are a great tool for risk seeking investors. Australia, Canada, New Zealand, South Africa and Brazil are the best known of these. The emerging nations the most risky.

Commodity Currency ETFs

US Dollars - PowerShares DB USD Bull ETF (NYSEARCA:UUP)

Lets call this the non commodity benchmark, yes I know America has commodities but commodities are usually priced in dollars, hence the inverse relationship.  A weak dollar will tend to support a commodity rally. Gold is the classic example of this.

Australian Dollar - Australian Dollar Trust ETF (NYSEARCA:FXA)

Australia is one of the largest providers of many commodity in the world, these include the iron ore, coal, LNG, Uranium, beef, wool and wheat.

AUM: $174.0 million
Average daily volume: 40,000 shares,
Fees: Expense ratio of 0.40%, this is offset against he higher interest rates in Australia at this time.
Zacks ETF Rank

There are days where the USDCAD traded hand in hand inversely with the oil price. As such the Loonie is extremely volatile.

AUM: $211.4 million
Average daily volume: 80,000 shares a day
Fees: The product charges 40 bps in annual fees.
Zacks ETF Rank #3 (Hold) with a Medium risk outlook
Brazil Real - WisdomTree Brazilian Real ETF (NYSEARCA:BZF)

Brazil with all its bets it seems placed on  commodities is one of the biggest swingers. China is one of Brazil's key trading partners. However like the Real it is small and very thinly traded.

AUM: $15.2 million
Average daily volume: 10,000 shares,
Fees: The product charges 45 bps in annual fees.
Zacks ETF Rank of 5 or "Strong Sell" rating with a High risk outlook.

Asia, Europe, LatAm & Africa Emerging Markets - WisdomTree Emerging Currency ETF (NYSEARCA:CEW)

This fund has a basket of Asian currencies (45%), Europe, Middle East & Africa (30%) & Latin America (25%).

AUM: $38.2 million
Average daily volume: 40,000 shares,
Fees: The product charges 55 bps in annual fees.
Zacks ETF Rank

There are other currency ETFs out there, remember weight he fees up with your own expertise, risk and capital to be allocated should you choose the product over the underlying.

Here is a link to Zack'sk ranking off the currency ETFs
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