5 Best Currency ETFs of 2024

An ETF is a type of investment that consists of a collection of securities such as stocks, bonds, commodities, and other assets. They are similar to index funds in the way that they track the performance of a market. But unlike index funds, they can be traded like stocks.

Exchange-traded funds can be an excellent entry point into the stock market for new investors. They’re cheap and typically carry lower risk than individual stocks since a single fund holds a diversified collection of investments. 

ETFs are becoming an increasingly popular way for investors to build diversified, low-cost portfolios. They can be bought and sold on an exchange throughout the day, just like regular stocks. Investors can earn investors dividends depending on the kind of index the fund is tracking. Their built-in diversification, as well as the minimal amount of capital needed to start investing, are just a few more reasons for their acclaim.

Types of ETFs

Many types of ETFs can expose your portfolio to different assets and markets. These include:

• Stock ETFs
• Bond ETFs
• Specialty ETFs
• Sustainable ETFs
• Commodity ETFs
• Factor ETFs
• Currency ETFs

Why Invest in ETFs?

There are many reasons to start investing in ETFs. Here are some of the top reasons we believe ETFs are an excellent choice for investment:

Industry leaders

ETF issuers have been offering innovative attractive financial products to investors for many years. This is the reason which has fueled the growth and demand for ETFs. Moreover, the issuers offer their extensive knowledge and insight to share with investors looking to execute their financial goals with confidence.  

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Diversification and risk management  

Striking a balance between risk and diversification is very important. And ETFs provide this to investors. 

ETFs have built-in diversification because they invest in dozens or even hundreds of different companies. In addition, ETFs also provide exposure to a variety of sectors, asset classes, and regions. As a result, they are often less risky than buying individual stocks since, while one company’s fortunes may decline, the worth of a group of companies is less likely to be as volatile.

Reduced costs  

An ETF is a combination of several different investments. Buying each investment individually is costly. Therefore, an ETF offers a less expensive option of buying a variety of investments, all the while diversifying the portfolio.

Simplicity and transparency  

It is very easy to start investing with ETFs. They are highly liquid and traded on an exchange. Furthermore, ETFs are professionally managed to achieve the fund’s goals, so the work of researching, buying, and selling is done for you. 

ETFs also provide more transparency than many other investment options. Most ETFs publish their holdings regularly, allowing investors to comprehend risks better. Moreover, investors will know exactly which securities their fund is holding due to the fact that ETFs track published market rules-based indexes.

Portfolios to reflect your values

Every ETF follows a different theme. Investors can invest in any they prefer. For example, if an investor is seeking ethical and sustainable investing, there are ETFs that only invest in companies that are part of an ethical and sustainable environment. Similarly, if an investor is seeking to invest in the tech industry, there are ETFs that solely invest in tech companies. 

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What are Currency ETFs?

Currency ETFs offer investors exposure to a single currency or a basket of currencies. The funds are comprised of currency futures contracts. Some of these ETFs implement popular currency strategies, such as focusing on currencies of commodity-producing economies or a currency carry trade.

Currency ETFs offer investors a less expensive way to start trading in currencies. This can be easily done during regular trading hours. Through currency ETFs, investors have access to the whole foreign exchange market, which is the largest market in the world.

Currency ETFs may include cash/currency deposits, short-term debt denominated in a currency, and forex derivative contracts. In the past, these markets were only accessible to experienced traders, but the rise of ETFs has opened the foreign exchange market more broadly.

Currency ETFs simplify foreign exchange investing

Currency ETFs have dramatically changed the way many people trade and participate in the foreign exchange markets. 

Previously, an investor interested in purchasing foreign currency had very few options to do it. Investors could buy foreign currency directly from certain banks and financial institutions. This usually comes with high fees.  Another option investors had was to open a futures account and trade in forex futures contracts. 

Today, an investor can purchase a single share of an ETF and get exposure to a basket of foreign currencies.

Ten of the largest currency ETFs by assets under management (AUM), as of August 14, 2023, include the following:

1. ProShares Bitcoin Strategy ETF
2. Invesco DB US Dollar Index Bullish Fund
3. WisdomTree Bloomberg U.S. Dollar Bullish Fund
4. Invesco CurrencyShares Euro Trust
5. Invesco Currencyshares Japanese Yen Trust
6. Invesco CurrencyShares Swiss Franc Trust
7. Invesco CurrencyShares British Pound Sterling Trust
8. ProShares Short Bitcoin Strategy ETF
9. Invesco CurrencyShares Canadian Dollar Trust
10. Invesco DB US Dollar Index Bearish Fund

Best currency ETFs of 2024

Here is a list of 5 Best currency ETFs

1. Invesco CurrencyShares Euro Trust (FXE)
2. WisdomTree Bloomberg U.S. Dollar Bullish Fund (USDU)
3. Invesco CurrencyShares Japanese Yen Trust (FXY)
4. iShares Currency Hedged MSCI EAFE ETF (HEFA)
5. Invesco DB US Dollar Index Bullish Fund (UUP)

Invesco CurrencyShares Euro Trust (FXE)

The investment seeks to reflect the price in USD of the Euro. The Shares are intended to provide institutional and retail investors with a simple, cost-effective means of gaining investment benefits similar to those of holding euro.

This whole fund has 100 % investment in cash holdings. One share of this trust is currently trading at 100.65.

This trust has a total value of $ 260.82 million with an expense ratio of 0.4 %. This trust was created in December 2005.

The below chart shows the performance of the fund for the past year.

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WisdomTree Bloomberg U.S. Dollar Bullish Fund (USDU)

USDU provides a broad exposure to the U.S. dollar against a basket of 10 worldwide currencies. The fund aims to give investors exposure to the appreciation of the U.S. dollar, which can benefit from strong economic growth, rising interest rates, and geopolitical uncertainties. Its value proposition hinges on the strength and stability of the U.S. economy, making it an attractive option for risk-averse investors.

This fund provides:

• Provides a broad, dynamic, and effective way of gaining exposure to the U.S. dollar against a basket of foreign currencies in an ETF structure
• Use in alternatives bucket as a broad-based diversifier as it exhibits strong negative correlations to international equity and bond portfolios

This trust has a total value of $ 245,700 with an expense ratio of 0.5 %. This trust was created in December 2013.

The below table shows the return of the fund over the past periods:

The below chart shows the performance of the fund over the past year:

The below table shows the asset classification of the fund:

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Invesco CurrencyShares Japanese Yen Trust (FXY)

The Invesco CurrencyShares Japanese Yen Trust (the “trust”) is designed to track the price of the Japanese yen and trades under the ticker symbol FXY. The Japanese yen is the national currency of Japan and the currency of the accounts of the Bank of Japan, the Japanese central bank.

This trust has a total value of $ 210.62 million, with an expense ratio of 0.4 %. This trust was created in February 2007.

Benefits of investing in this fund:

• Investors may wish to invest in the currency in order to take advantage of short–term tactical or 
• long–term strategic opportunities.
• An investor who believes that the U.S. dollar is weakening relative to the currency may capitalize 
• on the potential movement.
• An investor who believes that the currency is overvalued relative to the U.S. dollar may choose 
• to sell CurrencyShares, including short sales, as permitted by the Securities and Exchange 
• Commission (SEC).
• Investors are able to access the currency market through a traditional brokerage account and the shares trade daily on the NYSE Arca.

The below table shows the return of the fund over the past periods:

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iShares Currency Hedged MSCI EAFE ETF (HEFA)

HEFA gives investors exposure to large- and mid-cap equities in Europe, Australasia, and the Far East, while hedging against foreign exchange risk. The fund has the potential to benefit from the economic recovery and growth in Europe, Asia, and Australia, as well as from the low-interest rates and stimulus measures in these regions. The fund aligns with the investment goals of those seeking long-term capital appreciation and diversification while minimizing currency risk.

This ETF seeks to reduce the impact of foreign currencies, relative to the U.S. dollar, on your developed international allocation. Investors can easily combine HEFA with its unhedged version (EFA) to tailor currency risk while maintaining consistent equity exposure. It also taps into the scale of the underlying EFA holding.

Some upside of investing in HEFA include:

• Diversification and hedging: Forex ETFs can provide geographic and financial diversity to an investment portfolio and hedge against currency risk.
• Accessibility: These funds offer an easy way to gain exposure to foreign exchange markets without needing to engage directly in complex forex trading.
• Flexibility and liquidity: Forex ETFs can easily be bought and sold on exchanges like stocks, providing high liquidity and flexibility.

This trust has a total value of $ 3.6 billion, with an expense ratio of 0.35 %. This trust was created in January 2014.

The below table shows the return of the fund over the past periods:

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Invesco DB US Dollar Index Bullish Fund (UUP)

The Invesco DB US Dollar Index Bullish (Fund) seeks to track changes, whether positive or negative, in the level of the Deutsche Bank Long USD Currency Portfolio Index – Excess Return (DB Long USD Currency Portfolio Index ER or Index) plus the interest income from the Fund’s holdings of primarily US Treasury securities and money market income less the Fund’s expenses. The Fund is designed for investors who want a cost-effective and convenient way to track the value of the U.S. dollar relative to a basket of the six major world currencies – the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc (collectively, the “Basket Currencies”). The Index is a rules-based index composed solely of long U.S. Dollar Index futures contracts that trade on the ICE futures exchange (USDX® futures contracts). The USDX® futures contract is designed to replicate the performance of being long the U.S. dollar against the Basket Currencies.

This Fund is not suitable for all investors due to the speculative nature of an investment based upon the Fund’s trading which takes place in very volatile markets. Because an investment in futures contracts is volatile, such frequency in the movement in market prices of the underlying futures contracts could cause large losses.

Benefits of investing in this Fund:

• Diversify: The Fund may help you to diversify your portfolio of US equities if the value of the US dollar continues to have a low or negative correlation with US stock market performance. Of course, diversification does not guarantee a profit or eliminate the risk of loss. 
• Hedge: Because foreign investments are priced in foreign currencies if you are a US investor with foreign investments, you can lose money if the US dollar appreciates. An investment in the Fund may help you to Hedge — or protect — your US investments from a decline in the value of the US dollar.
• Seek profit: The US dollar historically has experienced long periods of appreciation and depreciation. You can act on your view on whether the US dollar will appreciate or depreciate by investing in the Fund. 
• Transparent, liquid, and convenient: The Fund invests in the USDX® futures contract, which is an actively traded contract listed on a regulated futures exchange. The Fund gives you convenient and immediate access to the performance of the US dollar because it trades on the NYSE Arca Exchange and you can purchase it in your securities brokerage account. 
• Earn interest: The Fund collateralizes its USDX® futures contracts with cash, US Treasury securities, money market funds, and T-Bill ETFs and earns interest on this collateral. Interest income can enhance Fund returns.

This trust has a total value of $ 496.71 million, with an expense ratio of 0.77 %. This trust was created in February 2000.

The below table shows the return of the fund over the past periods:

Components of this Fund:

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