Finding the right ETFs for Currency & Rates positions

pjbltd

Hi

Any etf experts out there?
I spend a lot of time following the markets and for my own portfolio wish to hold the following positions:

Currency:

Long AUD
Long BRL
Short CHF
Short EUR

Rates:

Long US Rates*
(i.e. make money if rates go down)
*in short end of the curve i.e. 3 month futures e.g 30 day CBOT fed fund futures

Any recommendations on how to build these positions using ETFs?
I am assuming ETFs would be the most efficient way.

Many thanks:D

pjbltd

I will post my ideas as I research them.

CurrencyShares Australian Dollar Trust ETF (FXA) appears to be an easy way to go Long AUD but not having much luck finding any short ccy etfs or interest rate etfs.

Any help much appreciated.

tradetime

I'm not an "ETF expert" but I am fairly familiar with ETF's outside of the UK (where most reside)
With regards to your queries.
Australian Dollar FXA as you say
there was an ADE in the form of an exchange traded note (more risk) but I think it closed.
Brazillian Real BZF
Short Euro, the only ones I am aware of are leveraged shorts x2
DRR
EUO I'm inclined to believe (no research done) that you might be better off shorting FXE
Swiss Franc, I'm not aware of a short product, so you'd likely have to short FXF
As far as interest rates are concerned I am not familiar with any ETF product that tracks these.

You should be aware that liquidity may be a problem with some of these, particularly if you are shorting them.
Why do you want to use ETF's to achieve this? You mention futures in relation to interest rates, the whole thing could probably be better achieved via futures.
Or alternatively do it through a FX broker.

laffer

why do you want to go long on the AUD?

tradetime

laffer wrote: »

why do you want to go long on the AUD?

Not that it isn't a valid question, but your posing it suggests you have the opposite view so I'd wonder why not?

turbobob

With these funds being American and priced in USD would there not be a 3 way currency conversion to think about (assuming you are looking to convert back to sterling)?

tradetime

turbobob wrote: »

With these funds being American and priced in USD would there not be a 3 way currency conversion to think about (assuming you are looking to convert back to sterling)?

There would, you'd have to convert to USD assuming you don't already hold USD for trading, and then convert back, if you chose a decent broker though that should be less of a problem. I'm not convinced these products are the best way to go as I suggested to the OP, there is a lack of liquidity in some of them, I will have a look at the spread this produces a little later when the US opens, but I personally would trade FX if I wanted to speculate on currency.

laffer

tradetime wrote: »

Not that it isn't a valid question, but your posing it suggests you have the opposite view so I'd wonder why not?

I am no expert at all. I was just posing a question looking for an honest answer. I am not too sure about the future of the AUD. The AUD is heavily dependent on China and Japan and I cannot see Japan recovering any time soon and China, well, who knows. Perhaps this comment has proved that I am no expert. Rather I would be interested in the future of the AUD as I have to convert some £ to AUD and am looking for the best way (and time) to do it.

tradetime

laffer wrote: »

I am no expert at all. I was just posing a question looking for an honest answer. I am not too sure about the future of the AUD. The AUD is heavily dependent on China and Japan and I cannot see Japan recovering any time soon and China, well, who knows. Perhaps this comment has proved that I am no expert. Rather I would be interested in the future of the AUD as I have to convert some £ to AUD and am looking for the best way (and time) to do it.

LOL, no expert here either, I was just trying to draw out some informed comment or view if you did speculate in this area. My view for what it's worth is that come some sort of recovery, whenever that may be, all resource rich countries, without exceptional debt burdens, of which Australia is one should see their currencies do well, I would agree that as long as the demand for natural resources remains subdued, there will be some downward pressure on their currency

purch

I am assuming ETFs would be the most efficient way

What size (:eek:) are we talking ??

pjbltd

Thanks for all the replies.
Looking to invest up to £4000.

ETFs are very liquid instruments and heavily traded, I'd say a bigger risk would be counterparty risk (JPMorgan and Bank of New York).

For those interested my reasons for Long AUD are two fold:

1. Interest rate differentials (primary driver in exchange rates). Australian Central Bank is not looking to cut rates as their economy is in their words has "suffered the worst already", while the US is going to be keeping rates artifically low for a v. long time.
2. Commodity Exporter. Believe demand for commodities will remain (especially fuelled by investors). The currencies of commodity exports will appreciate on back of this.