Euro Currency ETF

[s_dooley24]

Just wondering what Selkirk and others thought about this play. Really a euro vs dollar speculation

Strange Currencies
Rydex Investments thinks investors should be able use an ETF to speculate on the price of the euro or to hedge the foreign currency exposure. The proposed Rydex Euro Currency Trust will track the price of the European Union's currency versus the dollar. This fund, which will trade on the New York Stock Exchange, could make another market that has been the province of large investors accessible to small fries.

The ETF, however, has many of the same drawbacks as the metals funds. It will tap interest earned on the euros it buys to pay expenses, but if that income isn't sufficient it will have to sell euros. Those sales could erode the ETF's share price if the currency doesn't appreciate enough and would be taxable events for U.S. shareholders.

This fund's biggest bugaboo, however, is the unpredictable nature of foreign exchange rates. Even Federal Reserve Chairman Alan Greenspan has likened any attempts to predict the course of currencies to a coin toss. Heck, you just have to look at this year: At its onset, everyone was convinced that the dollar would continue to struggle against the euro, but in fact the opposite has been true so far. And as for currency hedging, most studies show that over the long term it has minimal effect on returns. Small investors would probably do more harm to themselves than good with this fund.

ROCKVILLE, MD -- (MARKET WIRE) -- 12/12/05 -- Rydex Investments today announced that shares of the Euro Currency Trust, a currency-based exchange-traded product, will begin trading today on the New York Stock Exchange. Shares of the Trust will be called "Euro CurrencyShares(SM)" and trade under the ticker symbol FXE. Euro CurrencyShares will track the price of the euro. The Trust has registered 17,000,000 Euro CurrencyShares, which each represent approximately 100 euro. The proposed maximum aggregate offering price is approximately $2.0 billion. Bear Hunter Structured Products, LLC, Bear, Stearns & Co., Lehman Brothers, Inc. and UBS Securities LLC are Authorized Participants and may purchase and redeem Euro CurrencyShares directly from the Trust in large blocks called baskets. It is expected that the Euro CurrencyShares will be offered and sold to the public by Authorized Participants at varying prices in U.S. dollars to be determined by reference to, among other things, the market price of the euro and the trading price of the Euro CurrencyShares on the New York Stock Exchange at the time of each sale.

 

[selkirk]

Not a bad way to play the Euro as a trade, if you believe it will make a move.

however do not ussual speculate on currencies, (hard to get it correct). also the small investor can buy companies based in Asia, Europe, South America, NA, ect. along with etf on almost every country.

if you want exposure and not have all of your money in US $, or in my case Cdn. $ (which has done well the last two years, and should at least hollds it value if not go higher); one can buy closed end International bond funds, or even open an account in the chosen currency.

some allow you to pick many different types of securities and are insured for a low investment. Insured of going to zero, you still could lose or gain on the performance of the currency you choose.

thanks
selkirk

 

[s_dooley24]

Really just drinking more of Warren Buffett's cool aid...with the trade imbalance that the US has and the defecit we are running it is hard not to want to fade the dollar long-term. To change those two things would take a change in gov't philosophy and that doesn't happen overnight. I have played this to an extent with gold, but that is also a play on world instability imo. The euro has had a nice run against the dollar already, but no fundamentals are changing from what I can tell to reverse this situation

 

[s_dooley24]

selkirk when you get a chance will you take a look at this Canada fund and let me know your opinion. I own it in my 401k portfolio, but I am considering purchasing it for other portfolios. I like the 23% it has invested in the energy sector (Encana being their top holding a shade above 5%), but would like your take on the 28% in hold in Financial Services sector. Looking over my other holding I would consider myself already concentrated in the FS area, so I am not sure I want more exposure even if rising interest rates here at home would be good for that sector of business. Also, another way for me to gain exposure to another currency against my dollar positions.

Fidelity Canada FICDX
Morningstar's Take | 05-18-2005
by Dan Lefkovitz

Fidelity Canada is good at what it does, but its narrow focus poses risks, and this may not be the time to buy.

Gaudy recent returns have drawn quite a bit of attention to this formerly low-profile offering. The fund's asset base has reached almost $1 billion thanks to its 10% average annual gain over the trailing five-year period--a record that puts it near the top of the 172-fund foreign-large-blend category. (That category is, we admit, a poor fit, but there aren't enough Canada funds to warrant an entire category.) Several factors help explain performance: the relative strength of the Canadian dollar, a slug of red-hot Canadian energy names, and some standout companies that happen to be domiciled in Canada, such as Blackberry maker Research in Motion RIMM.

We're generally skeptical of funds focused on single, smaller markets, but this one does have some selling points. Unlike many such offerings, it's fairly cheap. And it focuses on a market that's sometimes neglected by diversified foreign funds--Canada is not included in the popular MSCI EAFE Index--so investors may be filling a hole with this fund. It's certainly more appealing than the highly concentrated and large-cap heavy iShares MSCI Canada Index ETF EWC, which this fund's current manager, Maxime Lemieux, and his predecessors have consistently beaten.

But investors should remember that the same factors that have powered this fund's gains could easily be reversed. If enthusiasm for energy, industrials, and materials wanes, the 30% of this fund's portfolio that is invested in those sectors would take a heavy hit. A Canadian dollar slide would also hurt badly.

Investors should also check for overlap before buying this fund. Several of Fidelity's diversified foreign funds have sizable Canada stakes, and many U.S. funds buy Canadian stocks as well. Even if this fund holds appeal, buying after a prolonged rally is often a dangerous proposition.

See Previous Analyst Reports



Year Total Return (%) +/- Category
YTD 6.19 0.23
2005 27.89 13.29
2004 23.92 6.68
2003 51.91 18.68
2002 -4.27 12.68
Data through 02-28-2006

Fund Family Score for International Stock: 4.1
Number of Funds Scored: 19
Not unexpectedly, there's a lot to choose from here. The firm's core international offerings tend to be fairly mainstream. They pay close attention to benchmarks, making only measured country and sector bets, so investors shouldn't expect to see much bravado from them. That said, they're a solid, bankable bunch. The firm's vast analyst corps also means that Fidelity has some of the best regional funds around; its European, Asian, and Latin American offerings are particularly solid. Most investors could do without the firm's more-focused funds, though, such as the Nordic and China Region funds.

Role in Portfolio
Specialty. Although this offering isn't as risky as a single-country fund devoted to an emerging market such as South Korea, its devotion to a single small market makes it inappropriate as a core international fund.


Morningstar Rating
5*



Kudos

Impressive performance in recent years.


Provides exposure to Canadian companies that might not be included in broader international funds.


Manager keeps the portfolio broadly diversified.


Risks

Restricted to a single, fairly small stock market.


Can be surprisingly volatile.


Performance could suffer if energy lags or the Canadian dollar declines.


Because of strong asset inflows, manager is restricted to mid- and large-cap stocks.



Strategy
Like most of Fidelity's international managers, Maxime Lemieux uses a growth-at-a-reasonable price approach. He focuses on large-cap and mid-cap Canadian stocks with catalysts for medium-term growth. Because of the makeup of the Canadian market, the fund usually has substantial stakes in financials and energy, though management doesn't shy away from making big changes to the fund's sector weightings. The fund does not hedge its exposure to the Canadian dollar.



Management
Maxime Lemieux replaced Stephen Binder in November 2002. Lemieux joined Fidelity in 1996 and has followed Canadian companies in several capacities since then. In addition to this fund, he has managed on his own a Canada fund that largely targets small- and mid-cap companies since mid-2000 (that fund is available to Canadian investors) and has comanaged others.



Inside Scoop
This fund focuses on a single, relatively small market. Its portfolio weightings often deviate significantly from the major Canadian indexes. Its manager came on board in November 2002.

 

[selkirk]

Dooley since I am a Cdn investor believe the prospects for this market are good. if not would build a bomb shelter or just leave.

read the report and agree with many items, points. basically 50% of the index is metals, base metals, gold, and almost 30% of the index is energy.

at one time in 1999 over 1/3 of the index was in the mighty Nortel....now...well.

anyways glad to see that the fund does not just follow the index. and it seems to have a good track record....by the way EWC is the barclays unit that Tracks Canada (index).

as for the financials most of them are CIBC (CM), BNS, TD, RY, BMO, Manulife MFC, Sunlife SLF, ect. these are the major holdings and they trade on New York so you can see they have done well.

National Bank believe does not trade in the US smaller 6th bank done well also.


Dooley you will not lose on these financials, though I do believe they are not cheap....looking for 10% each year counting div...which is close to 3%.

basically Toronto will follow commodities. oil, base metals and gold....well mainly oil.

As a US investor would consider Canada Fund, index or just some indivual companies are a good way to increase foreign exposure.

however would not put all my foreign holding in Canada.


As for ECA still a good company and a great way to play natural gas, just seeing if it can rebound from the sell off.

note: THX was up .5% ECA 2.8% today. would prefer the ECA because of the oil sands kicker that no one cares about.

should state no very little about THX. as the last artilce posted if you believe natural gas declines over the last three years would avoid the index and the sector.

in the energy index you would have companies like Tailsman TLM, CNQ cdn. natural resources, Petro Canada, Suncor SU, and one that I do not ussually mention but has had great numbers Nexen.

unsure on oil, thought it would break down but holding up.......

cdn. market makes up roughly 3.8% of the worldwide markets.

biggest risk besides oil/gas prices is if the US economy tanks, we ship 85% exports to the US.........

thanks
selkirk

 

[s_dooley24]

This etf play on euro/dollar specualtion is up close to 8% for the year


CURRENCIES: Dollar Falls To 1-year Euro Low On ECB Chief Comments

05-04-06 01:30 PM EST
The dollar weakened across the board Thursday, hitting a fresh one-year low against the euro, as investors shrugged off a hotter-than-expected U.S. inflation report and focused instead on hawkish comments made by the European Central Bank president.

The Frankfurt-based ECB on Thursday held its key interest rate at 2.5%, as expected. At a post-decision press conference, Jean-Claude Trichet, the ECB's president, used the phrase "strong vigilance" to describe the ECB's view toward inflation. He also said the G-7 statement did not signal any change in the relationship between the euro and the U.S. dollar.

Trichet "was quite suggestive of more rate hikes ahead for the ECB," said David Gilmore, a partner at Foreign Exchange Analytics. In addition, "there wasn't much of a protest from Trichet in light of the rise of the euro against the dollar since the G-7 meeting.

"He mentioned the adjustment process was already unfolding and looked to be orderly, which to me was recognition that the dollar decline to date may not be what the G-7 is promoting, but it's what the market is delivering and is natural in the face of the imbalances."

In New York trading, the euro was last up 0.5% at $1.2685, after earlier touching $1.2692, the highest level since May, 2005. The dollar weakened 0.4% at 113.36 yen. The British pound was fetching $1.8482, up 0.5%. The dollar was fetching 1.2294 Swiss francs, down 0.6%.

Brian Dolan, head of currency research at Gain Capital, said Trichet comments were "relatively hawkish" but he "downplayed the possibility of moving more aggressively with a 50 basis point hike."

"This suggests that the euro side of the coin is losing its momentum, leaving the U.S. dollar and U.S. data to determine the next move," he added.

Earlier, the dollar showed a limited reaction to a Labor Department report showed a larger-than-expected increase in unit labor costs.

The productivity of the American workplace increased at a 3.2% annual rate in the first three months of the year. Unit labor costs - a key inflation gauge - increased 2.5% in the nonfarm business sector in the quarter. Economists predicted productivity would rise 2.9%, while unit labor costs were expected to rise 1.3%.

Separately, first-time applications for state unemployment benefits drifted higher by 5,000 last week to 322,000, the highest level since Nov. 19, the Labor Department said.

Analysts said the dollar found some support ahead of what is expected to be a solid April U.S. payrolls number on Friday.

Payrolls probably grew by about 200,000 after gaining 211,000 in March and 225,000 in February, according to economists polled by MarketWatch.

"I suspect we could get above 1.27 today, the only thing holding this back is the payroll number tomorrow," Gilmore said.

"The dollar is trending lower. Bullish economic news on the U.S. economy is not doing much to help the dollar," he added.

Also on Thursday, the Bank of England left its policy rate unchanged at 4.5%, in line with expectations, amid increasing optimism that the U.K. economy can offset a slowdown in consumer spending with manufacturing growth.

The central bank, in keeping with its custom when not moving interest rates, didn't comment on its decision.

U.K. April services PMI surged 59.7 from 57.4, suggesting the U.K. economy continues its strong rebound.

Separately, data from the Halifax Building Society that showed U.K. house prices rose 2% in April, bringing the annual increase to 8%, the highest for 13 months, raising speculation the BOE may have to become vigilant about upside inflation risks the year progresses.

The greenback had earlier stabilized against the yen after Japan's Finance Minister Sadakazu Tanigaki said currency movement is excessive and the G7 statement did not mean the dollar had to adjust lower. He said the market may have misunderstood the statement on exchange rate flexibility.

Japanese officials, concerned about the impact of rising yen on the still fragile Japanese economy, have made a series of statement in recent days to counteract dollar weakness.