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Articles on FXA

  • Long Short Commodity and Currency ETFs Can Be Useful to Diversify Your Portfolios

    06/21/2011

    Recent market volatilities reminded investors that risk is heightened. For a long term retirement investor, diversification among assets is the first step. On the other hand, some long short strategies in alternative asset classes such as commodities and currencies can be used to further tame market fluctuation.

    In the recent financial crisis investors took huge hits. During the financial crisis, some smart investors invested in alternative area such as Exchange traded funds (ETF's) that tap into managed-futures strategies popular with hedge funds and commodity-trading advisors. For these investors, they were rewarded as these managed futures based ETFs performed well during that period.

    The managed futures strategy is nothing new; hedge funds and other large, sophisticated investors have been using quantitative methodologies to direct futures-based strategies for years.

    Let's take a look at some of commodity and currency long short strategy based ETFs:  

    Description

    Symbol

    1 Yr

    3 Yr

    5 Yr

    Avg. Volume(K)

    1 Yr Sharpe

    Elements S&P CTI ETN

    LSC

    11.45%

    NA

    NA

    43

    59.01%

    iShares Diversified Alternative

    ALT

    3.54%

    NA

    NA

    24

    88.78%

    WisdomTree Managed Futures

    WDTI

    NA

    NA

    NA

    48

    NA

     

    For more information on ETFs in various asset classes, please refer to MyPlanIQ ETFs in Asset Classes page.


    Clearly the best performer is LSC in the table with the return of 11.43% in a year followed by the ALT with a return of 2.24%. Although the LSC is down from the past week when the returns are 14.43% this is in line with the worldwide corrections in stoks. The expense ratio of LSC is 0.75% which is also the least as compare to the other ETF's. Please find below the May 2011 long/short positioning of the Index sectors as well as the long/short positioning of the prior month.

     


    Sector

    Previous Position

    Current Position

    Weight*

    Energy

    Long

    Long

    37.50%

    Grains

    Short

    Long

    23.00%

    Industrial Metals

    Long

    Short

    10.00%

    Precious Metals

    Long

    Long

    10.50%

    Livestock

    Long

    Short

    10.00%

    Softs (by Commodity)

         

    Cocoa

    Short

    Long

    2.00%

    Coffee

    Long

    Long

    3.00%

    Cotton

    Long

    Short

    2.00%

    Sugar

    Short

    Short

    2.00%

    LSC is based on a well known S&P Commodity Trends Indicator - Total Return index. The Index is designed to apply a long/short strategy to six commodity sectors comprised of sixteen traditional, physical commodity futures contracts. The Index is a total return index designed to reflect the performance of a fully collateralized investment in the futures contracts. Readers can compare LSC with MyPlanIQ's P S and P Commodity Trend Indicators Strategy which models the same S&P CTI index using Powershares DB commodity ETFs such as (DBP), (DBB), (DBA) and (DBO).

    ALT return on the securities is linked to the performance of portfolio foreign currency forward contract and exchange traded future contracts that may involve commodities, currencies, interest rate and certain eligible stocks or bonds indices while seeking to reduce the risks and volatility inherent in those investment by taking long and short positions in historically co-related assets.

    WDTI employs a quantitative, rules-based strategy designed to provide returns that correspond to the performance of the Diversified Trends Indicator (DTI). The index is a composite of 24 highly liquid futures grouped into 14 sectors, with an even split between financials (i.e., currencies and interest rates) and physical commodities. The positions of each sector are either long or short (except for energy) based on price behaviour relative to a moving average (if energy is not positioned long, the sector weight is allocated to other sectors). Sector weights are determined by global production for commodities, and by GDP tiers for financials. Readers again can compare this fund with MyPlanIQ's P S and P Diversified Trend Indicators that, in addition to Powershares commodity ETFs, uses CurrencyShares ETFs such as (FXE), (FXY), (FXA), (FXF), (FXB), (FXC) to model the S&P DTI index.

    The actively managed long short ETFs mentioned above can indeed provide some diversification benefits for a retirement investing portfolio. As these ETFs are relatively new, investors should monitor these ETFs and do their due diligence.

    Disclaimer: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical. 

    Symbols: LSC, ALT, WDTI, DBO, DBP, DBA, DBB, FXE, FXY, FXA, Portfolio Strategies, Managed Future ETFs

     

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  • Aussie Dollar, Swiss Franc and Swedish Kroner Lead the Pack

    05/01/2011

    Currencies can be a major element of any portfolios. Currencies can be used as a predictive indicator for stocks and other assets. The dollar – the single major currency holds almost 60% of the world reserves. The currency market is 4 trillion dollar daily which is huge and was previously dominated by central banks but today retail investors can, and do, participate  The leverage and potential to earn quick money makes it a place for speculators and billionaires.

    We analyze the currency by using ETFs to see whether there are possible longer term investments that can be made to help provide a variant to a portfolio and also helps to improve the potential for risk adjusted returns.

    Assets Class

    Symbols

    04/27
    Trend
    Score

    04/20
    Trend
    Score

    Direction

    Australia Dollar

    FXA

    10.58%

    8.94%

    ^

    Swiss Franc

    FXF

    10.32%

    7.69%

    ^

    Swedish Krona

    FXS

    9.56%

    8.14%

    ^

    Brazilian Real

    BZF

    9.52%

    9.6%

    v

    Euro

    FXE

    6.86%

    4.67%

    ^

    US Dollar Bearish

    UDN

    5.86%

    4.22%

    ^

    Mexican Peso

    FXM

    5.64%

    4.86%

    ^

    British Pound

    FXB

    4.79%

    2.78%

    ^

    G10 Carry Trade

    DBV

    4.58%

    4.55%

    ^

    Canadian Dollar

    FXC

    4.37%

    4.07%

    ^

    Japanese Yen

    FXY

    3.06%

    2.08%

    ^

    Chinese Yuan

    CYB

    1.15%

    0.8%

    ^

     

    Overall the US dollar gets hammered around the globe which is in line with expectations with QE-II and the Fed’s recent comments that the central bank will still keep purchasing bonds after QE – II expires. The trend score shows a rise in all major currencies across the globe. The momentum is still in favors of high yielders. Check this graph of the top currencies

    The Australian dollar is the commodity based currency; show the high trend due to surge in commodities across the board. The economy remains strong and has good balance of trade figures as China and other major trading partners drive demand for mineral resources. The change US FX legislation (i.e. no hedging is allowed in the FX market and trades must be settled on a FIFO basis) makes the Australian currency ideal for trading as Australia allows hedging and normal trading. The Australian dollar 4 week returns show a rise indicating that the gains are still positive despite a one week dip. The FXA has risen 39.89% from 31-12-2008 which is also in line with the commodity advancement. The caution is to be taking in the FXA as the gains are heavy now and the profit taking can be seen by the investors.

    The Swiss Franc has made remarkable return being a safe currency. The currency has risen by 23.63% from its 31-12-2008 level making it vulnerable for profit taking by investors and speculators.

    The Swedish Krona is backed by the strong fundamental. The Swedish government is estimating that Sweden’s economy will expand 3.8 percent in 2012 and 3.6 percent in 2013. The growth forecast for this year was revised to 4.6 percent from the last month’s estimates of 3.7 percent growth. Steady rise is expected in the upcoming weeks in Swedish Krona.  

    The chart shows the graph of bottom funds.

    The Japanese yen shows remarkable returns over the last two year due to the recent disaster their currency suffered the major blow which has put their currency under pressure.

    China continues to its march as a leading provider and its economy continue to grow. Until there is resolution on how the currency appreciates, there will be pressures on the returns.

    The UK Pound is tending to be bound between $1.7 and $1.55. A real rally is not expected in the FXB until interest rates start to increase in the UK. Although inflation is on the rise it is mainly due to the increase in oil and commodity prices which cannot be controlled by the UK government so we are not expecting a rise in the interest rates till real inflation hits.

    It is worth noting:

    • The recent rise in the Canadian dollar brought the Canadian dollar above US Dollar parity. This rise is due to the recent rally in oil which is causing inflation worldwide but also appreciating the Canadian currency.
    • G10 carry trade is shorting yen and buying the high yielders in anticipation of future interest rate hikes. Overall the gains are steady except in current period where after the deadly tsunami in Japan which caused whiplash in the 4 & 1 week returns. The carry trade is not back yet but the recent weakness in the yen causes concern because as long as the interests of the G10 are low the carry trade is rarely attractive.  


    The dollar was weakened by the FED’s systematic devaluation making interest rates near to zero to improve the domestic economic growth. The devaluation in the dollar creates the rally in all major currencies especially the yen which enjoyed a substantial gain from 2008 to 2011 before the recent catastrophe. The Australian dollar and Swiss Franc delivered the best returns year to date.  Currently the high yielders are stealing the show against the dollar.

     

    Exchange Tickers: (NYSE: DBN), (NYSE: UDN), (NYSE: FXA), (NYSE: FXB), (NYSE: FXC), (NYSE: FXE), (NYSE: FXF), (NYSE: FXS), (NYSE: FXY), (NYSE: FXM), (NYSE: CYB), (NYSE: BZF)

    Symbols: DBN, UDN, FXA, FXB, FXC, FXE, FXF, FXS, FXY, FXM, CYB, BZF

    Disclaimer

    MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.

     

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  • Currencies All Jump Caution Advised

    03/04/2011

    MyplanIQ tracks currencies using the following  currency ETFs (FXS), (FXF), (FXA), (FXC), (FXB), (FXM), (UDN), (FXE), (FXY), (DBV), (CYB), (BZF) to Monitor the trend for bellweather currencies.

    In the light of continued and growing unrest in North Africa, we would have anticipated the continued flight to safe currencies and others would have been under downward pressure. We do not see that trend emerging.

    All currencies, with the exception of Japan, are moving upward. It is true that the top three are also considered safe haven currencies but we would have expected to see the Swiss Franc have the biggest jump if it were a move to safety trend and we don't see that.

    This may signal that while there is an expectation that oil prices may rise and cause some short term turbulence, there is less concern that this will have any lasting impact on the economy.

    Assets Class Symbols 03/02
    Trend
    Score
    02/23
    Trend
    Score
    Direction
    Swedish Krona FXS 8.52% 7.89% ^
    Swiss Franc FXF 7.26% 7.18% ^
    Australia Dollar FXA 7.23% 6.42% ^
    Canadian Dollar FXC 4.42% 3.29% ^
    British Pound FXB 3.87% 3.02% ^
    Mexican Peso FXM 3.72% 2.56% ^
    US Dollar Bearish UDN 3.67% 3.34% ^
    Euro FXE 3.22% 2.96% ^
    Japanese Yen FXY 2.65% 2.73% v
    G10 Carry Trade DBV 2.41% 1.76% ^
    Chinese Yuan CYB 0.54% 0.49% ^
    Brazilian Real BZF -0.5% -1.35% ^

    The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).

    The Krona continues to lead the table as the economy continues to deliver impressive results. There remains little concern about the currency appreciating and that hurting exports.

    The Swiss central bank has issued comments that they will keep a firm grip on inflation and that interest rate rises will be used as they believe the low rates in other Eurozone nations are not sustainable.

    The Aussie dollar also climbed sharply despite mixed news between rising commodity prices and less than expected building permits indicating softness in their construction industry.

    The Real moved into positive territory as the central bank raised interest rates again. With already high interest rates, the government is trying to avoid overheating the economy even as their currency is making exports more expensive.

    The Yuan is little changed as the country's leaders gather for  the National People's Congress, which begins Saturday. There are signs that the government may be getting serious about allowing the currency to appreciate but that will have to wait until the session is over.

    The G10 Carry Trade Currencies highlight the reduction in concern about the current strife in North Africa in the Middle East but there should be some concern that if this does spread, there may be greater impact on the world economy.


    It's hard to throw off the old expectations that currencies will be under pressure during times of world tension and while most of the currencies are moving up, there is reason to be cautious and see if there is a correction next week.


    Symbols:FXS,FXF,FXA,FXC,FXB,FXM,UDN,FXE,FXY,DBV,CYB,BZF,

    Disclosure:

    MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.

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  • Political Unrest Resurfaces, Presses Down on Most Currencies

    02/18/2011

    After a week when the initial resolution of unrest in Egypt reduced uncertainty and safe currencies dropped back, the new unrest in Bahrain has investors going back to their safe havens.

    Most currencies dropped in the light of the increasing tension in the Middle East although there were a couple of exceptions.

    We anticipate that this status will remain in place until we see how widespread and effective the current series of demonstrations against hard line governments turns out to be.

    Assets ClassSymbols02/16
    Trend
    Score
    02/09
    Trend
    Score
    Direction
    Swedish Krona FXS 7.42% 7.54% v
    Australia Dollar FXA 5.91% 6.98% v
    Swiss Franc FXF 4.65% 4.38% ^
    Canadian Dollar FXC 3.26% 2.25% ^
    Mexican Peso FXM 3.14% 3.64% v
    G10 Carry Trade DBV 2.5% 2.64% v
    US Dollar Bearish UDN 1.81% 2.43% v
    British Pound FXB 1.42% 1.41% ^
    Japanese Yen FXY 1.36% 2.35% v
    Euro FXE 0.99% 2.01% v
    Chinese Yuan CYB 0.46% 0.32% ^
    Brazilian Real BZF -0.55% 0.17% v

    The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).

    The Swedish Krona remains at the top of the pile. Sweden have announced interest rate rises and appear comfortable with what that will mean for the currency. Despite that, and the fact that Sweden is something of a safe haven, the currency dropped back a little after the interest rate announcement. It's hard to say whether this was a function of political unrest or the interest rate hike being priced in before hand.

    The Australian Dollar is caught between a downdraft due to employment data that didn't meet expectations and the upswing of Asian sentiment which bodes well for the country. Australi are far enough away from the Middle East so as not to be caught up in ti.

    The Swiss Franc was a main beneficiary of the unrest. After having dropped back with the initial resolution of the Egyptian crisis, it was back in favor once Bahrain unrest surfaced.


    The Brazilian Real dropped back as it is influenced by its major trading partners. However, with rising commodity prices and the government focused on cutting government spending, there is an expectation that it will start to rise.

    The Chinese Yuan continues to appreciate and eventually it should start floating to the top of the pile. It remains an embattled currency as the developed nations complain about its imbalance and the Chinese Government is doing some window dressing before the upcoming G20 meeting.

    The Euro dropped back into the bottom three as its fragile recovery was dented by the spreading of uprisings in North Africa and the Middle East. There is continuing work to try and deal with the debt in the zone but that is going to be a continuing theme for the foreseeable future.

    Symbols:fxs,fxf,fxa,fxm,fxy,fxc,udn,dbv,fxe,cyb,fxb,bzf,

    Disclosure:

    MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.

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  • Currencies Tumble Across The Board -- Mexico's Peso Bucks the Trend

    01/07/2011

    MyPlanIQ tracks trends in multiple categories using ETFs. For more information, please visit MyPlanIQ 360 Degree Market View.

    After a couple of positive weeks, currencies tumble. Only the Mexican Peso bucks the trend and on that basis pops into the top three. 

    The bottom of the table remains the same although the Real should break out of there before too long.

    Assets Class Symbols 01/05
    Trend
    Score
    12/29
    Trend
    Score
    Direction
    Australia Dollar FXA 6.0% 10.31% v
    Mexican Peso FXM 3.47% 2.59% ^
    Swedish Krona FXS 3.42% 4.25% v
    Japanese Yen FXY 2.82% 5.73% v
    Swiss Franc FXF 2.81% 6.42% v
    Canadian Dollar FXC 2.37% 3.57% v
    G10 Carry Trade DBV 1.59% 2.34% v
    Chinese Yuan CYB 0.4% 0.5% v
    US Dollar Bearish UDN -0.63% 1.34% v
    British Pound FXB -1.15% -0.45% v
    Euro FXE -2.37% -0.26% v
    Brazilian Real BZF -4.52% -3.79% v

     


    Despite strong fundamentals, the Australian Dollar has fallen to two week lows as confidence on growth waned in the wake of heavy flooding in Queensland. It still heads the table by some distance as it remains well poised as China drives demand.

    The Mexican peso's entrance into the top three could be a New Year phenomenon, as investors look forward to decent economic growth. In addition, the Mexican peso has become aligned with copper and crude oil prices, both of which Mexico produces and both of which are considered hot commodity items.

    The Swedish Krona hit its highest level against the Euro for six years as the Swedish economy warms against concern over the standing of the European single currency.



     


    The Real was hit by concerns of Brazilian banks shorting the US Dollar as the currency has already appreciated 37% against the Greenback.

    The Euro and the pound trade places at the bottom as they are mired with debt and austerity issues that will continue to drag on the currency even though the Euro has done better against some of the world currencies.

    We will see who returns to positive territory next week.

     

    labels:investment,

    Symbols:FXA,FXM,BZF,FXY,FXC,FXF,FXS,DBV,CYB,UDN,FXB,FXE,

     

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  • Year End Currencies -- WIP

    12/30/2010

  • Top Currencies Up Again; Weaker Currencies Falter

    12/25/2010

  • Currencies Up Again, With the Exception of the Yuan

    12/16/2010

  • World Currencies All Bounce Back

    12/10/2010

  • Currencies Nov 29

    11/30/2010

  • Currencies react to rate raises and bailouts

    11/23/2010

  • Currency ETF's show movement in who is top and who is bottom of the table

    11/19/2010

  • Currency ETFs Give Insight to National Fiscal Issues and Policy

    11/12/2010

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