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In fact, stock investors are increasingly using currencies to hedge against risks with their stock portfolios. However, the problem with doing this is they have to manage their currency and stock investments separately, making this sort of diversification difficult to handle. New currency exchange-traded funds (ETFs) eliminate this problem. With a currency ETF, an ETF management firm buys currency pairs and holds them in a fund. The firm then sells shares in the ETF to individual investors, who can then buy and sell them in just the way that they buy and sell stocks. As the currency pair arises, the corresponding share price rises in tandem, and the share price falls as the currency falls.
To understand why investors are interested in using currencies rather than just buying other shares, it is important to know the different types of risk in the stock market. The first is what is known as idiosyncratic risk – the risk that any particular stock will fall. For instance, if a company reports poor results, the stock price will typically fall, even if its competitors are doing well. This type of risk can be managed by buying a broader basket of stocks. However, there is also systematic risk – the risk that the entire stock market will fall. You only need to look at the initial effects of the recent world economic crisis to see this type of risk in action.
Buying a broader range of stocks doesn’t combat systemic risk. However, investing in currencies can do exactly this. For example, consider the Swiss franc. In general, history has shown that the Swiss franc rises against the US dollar when bond yields fall. Since falling bond yields generally happen when the stock market falls, holding a position in CHF/USD can hedge against the risk of a bear market. Similarly, the Canadian dollar tends to rise as oil prices rise, since Canada is a major oil producer. Because of this, investing in a CAD/USD ETF can be used to hedge against the impact of higher energy prices on the stock market.
Published On Tue, Jul 22 2014, 07:43 GMT Previous entries of Dealing in Currency ETFs RSS
FXTM Research Team Follow Follow my activity on FXStreet ForexTime (FXTM) website Contact Contact by email Forex Time (FXTM) is an international online forex broker regulated by the Cyprus Securities and Exchange Commission (CySEC) and in accordance with Law 144(I)/2007 is also a member of the Investor Compensation Fund (ICF). More articles by this author Also Read Focusing on China FxPro Understanding Future Market Direction Using an Interesting Study Online Trading Academy Monetary tensions FxPro Dollar decline FxPro
Legal disclaimer and risk disclosure
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Related Content Focusing on China FxPro Understanding Future Market Direction Using an Interesting Study Online Trading Academy Monetary tensions FxPro Dollar decline FxPro Tags: etf View All Most Popular Content ViewedE-MailedRatedHighlighted EUR/USD training at 1.2620 before another leap by FXStreetOct 1, 06:33 GMT EUR/USD: entering waiting mode by FXStreetSep 30, 19:20 GMT EUR/USD wobbling around 1.2600 by FXStreetOct 1, 10:22 GMT The dollar index hit a new four-year high of 86.218 by ZuluTradeOct 1, 07:23 GMT USD/JPY: Long at 108.60 for110.67; revised stop 109.09 by Danske Bank A/SOct 1, 05:22 GMT USD/JPY came back home below 110 by FXStreetOct 1, 09:03 GMT EUR/USD: entering waiting mode by FXStreetSep 30, 19:20 GMT It looks like the ECB has a tough row to hoe come Thursday by Rockefeller Treasury Services, Inc.Sep 30, 12:45 GMT Trading plan for Oct. 1 by FX BAZOOKASep 30, 14:18 GMT USD/JPY edges lower despite ADP gain
Wed, Oct 1 2014, 12:35 GMT AUD/USD recovery capped at 0.8725
Wed, Oct 1 2014, 12:33 GMT USD/JPY takes another stab at 110.00 but meets selling
Wed, Oct 1 2014, 12:24 GMT Traders Tools Forex Studies Monitor the markets with our customizable FX studies. Economic Calendar Live economic events calendar Live Currency Rates Live Forex Charts Rate history tool Currency Converter more tools Upcoming Live Events US Session Open Premium Webinar
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Latest Webinar Recordings Elliott Wave Live Analysis by Gregor Horvat | Tue, Sep 30 2014 US Session Open by Ed Ponsi | Mon, Sep 29 2014 US Pre-Market Open by Ed Ponsi | Mon, Sep 29 2014 Subscribe to RSS Preferred brokers in your location Rates & Charts Streaming Forex Rates Live Currency Rates US Dollar Index Exchange Rate Table Streaming Forex Charts Live Charts Window Currency Charts Console News Forex News Forex Tweets Forex Analysis Trading Positions Currencies Forecast Poll Technical Studies EUR/USD Exchange rate GBP/USD Exchange rate USD/JPY Exchange rate Economic Calendar Economic Calendar World Interest Rates Countries Forex Market Hours Webinars Schedule ArchiveEducation Learning Center Brokers Looking for a Broker/FDM? Platforms Stay ConnectedFacebook PageTwitter News FeedTwitter Research FeedTwitter UpdateRSS News FeedYoutube Google+FXStreet Social NetworkBlog
3 Contact information Full Name* Email* City/State* Telephone* Amount looking to invest* 0 - 4,999 USD 5,000 - 9,999 USD 10,000 - 24,999 USD 25,000 - 50,000 USD > 50,000 USD Message: (optional) Optional message to broker... By clicking Submit, I certify that I have read and agree to the FXStreet Privacy Policy Please select between 1 and 4 brokers to contact Don't show this form again Note: FXStreet treats your personal information as confidential and does not disclose it to any third parties other than the company selected. Your privacy is our greatest concern. Previous Next Sign up | Login English ??? Español ???? ???? ??????? Français Indonesia ??????? Italiano Deutsch Português Magyar Türkçe Ti?ng Vi?t Català ???
HomeRates & ChartsNewsAnalysisEconomic CalendarTechnicalToolsWebinarsEducationBrokersServicesFX NetworkEducational ArticlesForex BasicsTrading Strategies Markets RegulationTechnical AnalysisFundamental AnalysisMarket PsychologyRelated MarketsResourcesBooksDVDsGlossaryConventionsWorkshopsLearning CenterWelcomeUnit A: Absolute EssentialsUnit B: Analytical ToolsUnit C: System ModelingUnit D: Sum Up and Go Feedback We use cookies, internal and external, to improve your experience by offering content related to your preferences. By continuing to browse you are agreeing to our cookies policy. Dealing in Currency ETFs 
Tue, Jul 22 2014, 07:42 GMT
by FXTM Research Team | ForexTime (FXTM)
In fact, stock investors are increasingly using currencies to hedge against risks with their stock portfolios. However, the problem with doing this is they have to manage their currency and stock investments separately, making this sort of diversification difficult to handle. New currency exchange-traded funds (ETFs) eliminate this problem. With a currency ETF, an ETF management firm buys currency pairs and holds them in a fund. The firm then sells shares in the ETF to individual investors, who can then buy and sell them in just the way that they buy and sell stocks. As the currency pair arises, the corresponding share price rises in tandem, and the share price falls as the currency falls.
To understand why investors are interested in using currencies rather than just buying other shares, it is important to know the different types of risk in the stock market. The first is what is known as idiosyncratic risk – the risk that any particular stock will fall. For instance, if a company reports poor results, the stock price will typically fall, even if its competitors are doing well. This type of risk can be managed by buying a broader basket of stocks. However, there is also systematic risk – the risk that the entire stock market will fall. You only need to look at the initial effects of the recent world economic crisis to see this type of risk in action.
Buying a broader range of stocks doesn’t combat systemic risk. However, investing in currencies can do exactly this. For example, consider the Swiss franc. In general, history has shown that the Swiss franc rises against the US dollar when bond yields fall. Since falling bond yields generally happen when the stock market falls, holding a position in CHF/USD can hedge against the risk of a bear market. Similarly, the Canadian dollar tends to rise as oil prices rise, since Canada is a major oil producer. Because of this, investing in a CAD/USD ETF can be used to hedge against the impact of higher energy prices on the stock market.
Published On Tue, Jul 22 2014, 07:43 GMT Previous entries of Dealing in Currency ETFs RSS
FXTM Research Team Follow Follow my activity on FXStreet ForexTime (FXTM) website Contact Contact by email Forex Time (FXTM) is an international online forex broker regulated by the Cyprus Securities and Exchange Commission (CySEC) and in accordance with Law 144(I)/2007 is also a member of the Investor Compensation Fund (ICF). More articles by this author Also Read Focusing on China FxPro Understanding Future Market Direction Using an Interesting Study Online Trading Academy Monetary tensions FxPro Dollar decline FxPro Legal disclaimer and risk disclosure
Forextime is regulated by CySEC under license number 185/12 and registered with the UK FCA under reference number 600475.
There is a high level of risk involved with trading leveraged products such as forex and CFDs. You should not risk more than you can afford to lose, it is possible that you may lose more than your initial investment. You should not trade unless you fully understand the true extent of your exposure to the risk of loss. When trading, you must always take into consideration your level of experience. It is the responsibility of the Client to ensure that the Client can accept the Services and/or enter into the Transactions in the country in which the Client is resident. If the risks involved seem unclear to you, please seek independent advice.
Don't miss it out!You can be one of the five winners of this contest, with prizes of up to $10,000 in trading accounts and more gifts.Register now!Related Content Focusing on China FxPro Understanding Future Market Direction Using an Interesting Study Online Trading Academy Monetary tensions FxPro Dollar decline FxPro Tags: etf View All Most Popular Content ViewedE-MailedRatedHighlighted EUR/USD training at 1.2620 before another leap by FXStreetOct 1, 06:33 GMT EUR/USD: entering waiting mode by FXStreetSep 30, 19:20 GMT EUR/USD wobbling around 1.2600 by FXStreetOct 1, 10:22 GMT The dollar index hit a new four-year high of 86.218 by ZuluTradeOct 1, 07:23 GMT USD/JPY: Long at 108.60 for110.67; revised stop 109.09 by Danske Bank A/SOct 1, 05:22 GMT USD/JPY came back home below 110 by FXStreetOct 1, 09:03 GMT EUR/USD: entering waiting mode by FXStreetSep 30, 19:20 GMT It looks like the ECB has a tough row to hoe come Thursday by Rockefeller Treasury Services, Inc.Sep 30, 12:45 GMT Trading plan for Oct. 1 by FX BAZOOKASep 30, 14:18 GMT USD/JPY edges lower despite ADP gain
Wed, Oct 1 2014, 12:35 GMT AUD/USD recovery capped at 0.8725
Wed, Oct 1 2014, 12:33 GMT USD/JPY takes another stab at 110.00 but meets selling
Wed, Oct 1 2014, 12:24 GMT Traders Tools Forex Studies Monitor the markets with our customizable FX studies. Economic Calendar Live economic events calendar Live Currency Rates Live Forex Charts Rate history tool Currency Converter more tools Upcoming Live Events US Session Open Premium Webinar
Oct 01, 13:00 GMT Ed Ponsi
Preparing for the ECB and the NFP in the wake of Q4
Oct 01, 14:00 GMT Yohay Elam
Institutional Trading Strategies
Oct 01, 16:00 GMT Andrei Knight
Latest Webinar Recordings Elliott Wave Live Analysis by Gregor Horvat | Tue, Sep 30 2014 US Session Open by Ed Ponsi | Mon, Sep 29 2014 US Pre-Market Open by Ed Ponsi | Mon, Sep 29 2014 Subscribe to RSS Preferred brokers in your location
Rates & Charts Streaming Forex Rates Live Currency Rates US Dollar Index Exchange Rate Table Streaming Forex Charts Live Charts Window Currency Charts Console News Forex News Forex Tweets Forex Analysis Trading Positions Currencies Forecast Poll Technical Studies EUR/USD Exchange rate GBP/USD Exchange rate USD/JPY Exchange rate Economic Calendar Economic Calendar World Interest Rates Countries Forex Market Hours Webinars Schedule ArchiveEducation Learning Center Brokers Looking for a Broker/FDM? Platforms Stay ConnectedFacebook PageTwitter News FeedTwitter Research FeedTwitter UpdateRSS News FeedYoutube Google+FXStreet Social NetworkBlog Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer.
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