Monday, August 11, 2008

Currency Shares, or Why I Like Forbes Magazine

Forbes Magazine has turned up the most innovative investments. As an example, many, many years ago, before Apple Computer (AAPL) became public, I read an article in Forbes about how a publicly traded closed end venture capital fund called the Nautilus Fund happened to be an early stage investor in Apple Computer and owned lots of the company shares. When I read that article, I bought shares of Nautilus for myself and my family, and became hooked on Forbes. When Apple went public, Nautilus distributed the proportionate shares of Apple to each investor.

I also learned about CurrencyShares in a recent Forbes article. I might have stumbled upon these investments eventually but Forbes was the first place I saw a reference to them. CurrencyShares are exchange traded funds set up as trusts to track various currencies. So if you think a currency is going to go up in relation to the dollar, you don't have to buy a foreign exchange contract or go to a bank or foreign exchange office and buy large amounts of currency. Instead, you can buy shares in one of the CurrencyShares which trade on the New York Stock Exchange, just like a stock.

If you think the currency is going the other direction in relation to the dollar, you have a couple options [no pun intended]; you can either short the CurrencyShares or you can buy puts on the trust shares. Here are the CurrencyShares that are currently available.

CurrencyShares Australian Dollar Trust (FXA), which has a goal of tracking the price of the Australian Dollar, has had a 12.89% year to date return and pays a yield of 5.4%.

CurrencyShares British Pound Sterling Trust (FXB), which has an objective of tracking the price of the British pound, had a 2.46% year to date return and a 4.8% yield.

CurrencyShares Canadian Dollar Trust (FXC) had a year to date return of negative 1.35% with a 3.3% yield.

CurrencyShares Euro Trust (FXE), with an objective of tracking the Euro, which recently celebrated its ten year anniversary, has had a return year to date of 9.65% and a 3.2% yield.

CurrencyShares Japanese Yen Trust (FXY), which attempts to track the Japanese Yen, has had a year to date return of 4.80%.

CurrencyShares Mexican Peso Trust (FXM) has had a 9.43% year to date return and a yield of 5.8%.

CurrencyShares Swedish Krona Trust (FXS) has had a 9.39% year to date return and a 2.9% yield.

CurrencyShares Swiss Franc Trust (FXF) has had a 11.62% year to date return and pays a yield of 1.26%.

Too bad that there is no simple way to trade the Zimbabwe currency.

Author owns puts on FXE.

By Fred Fuld at


Stock Lurker said...

Long time reader of you blog, but strange synchroncity with this one because I bought FXE last month after searching for currency ETF on my own. ;)

Stockerblog said...

Hi Stock Lurker

Forbes listed the CurrencyShares in their June 6 issue. It's taken me two months for me to write about it. (Partially because I had taken positions in the puts of one of the ETF's and I had to wait a period of time to write about it.)