Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Looking To Speculate On U.S. Dollar Moves? This ETF Could Be On The Money

By Investing.com (Tezcan Gecgil/Investing.com )ETFsSep 09, 2021 04:13AM ET
www.investing.com/analysis/looking-to-speculate-on-us-dollar-moves-this-etf-could-be-on-the-money-200601312
Looking To Speculate On U.S. Dollar Moves? This ETF Could Be On The Money
By Investing.com (Tezcan Gecgil/Investing.com )   |  Sep 09, 2021 04:13AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

We regularly discuss currency exchange-traded funds (ETFs). For example, we recently looked at the Invesco DB US Dollar Index Bullish Fund (NYSE:UUP) that could appeal to US dollar bulls as well as the Invesco CurrencyShares® Japanese Yen Trust (NYSE:FXY) that sparks interest from Japanese yen bulls. Today, we introduce another currency ETF that could be appropriate for a range of portfolios.

Invesco DB US Dollar Index Bearish Fund

Current Price: $20.98
52-Week Range: $20.70 - $21.91
Expense Ratio: 0.77% per year

This fund could be used by investors who believe the greenback could fall. The Invesco DB US Dollar Index Bearish Fund (NYSE:UDN) tracks the returns of the DB Short USD Currency Portfolio Index ER. This index comprises short US Dollar Index futures contracts that trade on the ICE futures exchange.

Essentially, UDN moves higher when the value of the dollar index declines. As discussed in previous articles, the USDX tracks the value of the greenback relative to a basket of six major world currencies, i.e., the euro, the Japanese yen, the British pound, the Canadian dollar, the Swedish krona and the Swiss franc.

USDX has significant exposure to the euro, as well as other European currencies. UDN goes short the US dollar and, thus, is long the currencies of major US trading partners using USDX futures. So when the euro rises, the fund goes up.

The UDN fund started trading in February 2007. Its net assets stand at about $63.1 million. Over the past year, UDN is down 0.3%.

UDN Weekly Chart.
UDN Weekly Chart.

How could readers utilize UDN in a portfolio?

Market participants could use this currency ETF to speculate on the moves in the US Dollar Index. For example, those who are bearish on the greenback could buy UDN.

Similarly, speculators who expect a robust showing for the euro against the US dollar could buy UDN. In Germany, Chancellor Angela Merkel is stepping down. Therefore, foreign exchange analysts are debating what this political change could mean for the euro in the near future as a wide range of coalition possibilities are already being discussed. However, whatever the final result, many concur that the euro could move up against the US dollar.

This ETF could also act as a proxy for moves in broader US markets. Those who are bullish on the leading indices could potentially be expecting the dollar to depreciate. So again, they could go long UDN.

Those who plan to bet on interest rate moves might also be interested. All else being equal, if a country's central bank cuts interest rates, its currency's value also goes down. Thus, UDN could be used together with other ETFs appropriate for a low interest-rate environment in the US.

Investors interested in emerging markets could also consider USD. A weaker greenback is typically favorable for emerging market assets. On the other hand, those who believe emerging markets may go up, could decide to have long UDN exposure.

Commodity investors might rely on UDN as a potential hedge as well, based on the general view that most commodities and the greenback are inversely related. For example, when the US dollar appreciates, gold usually goes down in value.

However, in the commodity space, other factors come into play. So investors would need to do further due diligence depending on the commodity they are following.

Finally, entrepreneurs or business owners, like exporters or importers, who have US. dollar currency exposure could hedge potential currency risk with UDN. But putting together the perfect hedge in foreign currency cash flows over long periods is typically a complex financial transaction. Therefore, potential investors might need to consult with a financial adviser and monitor their portfolios quite frequently.

In summary, a currency ETF like UDN can bring flexibility to a large number of portfolios. However, be warned: currency markets are very dynamic, and moves can be volatile, rapid and unpredictable. Therefore, it is important to appreciate how macro economic events and political developments can affect the value of a country’s currency.

Looking To Speculate On U.S. Dollar Moves? This ETF Could Be On The Money
 

Related Articles

James Picerno
Commodities Post Strong Returns By James Picerno - Oct 11, 2021 1

Amid ongoing concerns over inflation, commodities continued to rise, posting the strongest gain for an otherwise mixed week for global markets through Oct. 8, based on a set of...

Looking To Speculate On U.S. Dollar Moves? This ETF Could Be On The Money

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (3)
Rilwan Muhammad
Rilwan Muhammad Sep 13, 2021 4:38AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
create currency morneis will companies deligath my course isu that onther standing we getting n
Arinze Ifediora
Arinze Ifediora Sep 09, 2021 11:03AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
pls u want to take my money back because I can operate this
Joe Boy
Joe Boy Sep 09, 2021 10:24AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
please Can I change my money to NERA
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email