Best and Worst Performing Currency ETFs of 2015
The U.S. dollar continued to gain strength against a basket of major currencies for the most part of 2015. This was due to a stable U.S. economy while the other major economies were having a tough time. Meanwhile, geopolitical tensions and divergence in monetary policies between the U.S. and other major players helped the U.S. dollar to surge against the major currencies last year.
Sluggish global growth environment forced the central banks of some developed economies including China, Euro-zone and Japan to implement economic stimulus measures such as quantitative easing program and rate cuts. On the other hand, a favorable economic environment, indicated by steady GDP growth and strong labor market data, allowed the Fed to raise the key interest rate for the first time in nearly a decade.
The favorable economic scenario in the U.S., which was also indicated by the Fed in their last policy meeting, in contrast to slowdown in other major economies including China encouraged investors to invest in the U.S. boosting the demand of the dollar. PowerShares DB US Dollar Bullish ETF (UUP) that tracks the performance of the U.S. dollar against a basket of currencies jumped nearly 5.6% in 2015.
Best Currency ETFs of 2015
WisdomTree Bloomberg US Dollar Bullish ETF (USDU)
Healthy gains in the U.S. dollar throughout 2015 helped USDU to provide the best return in 2015 among the currency ETFs. This product offers exposure to the U.S. dollar against a basket of 10 developed and emerging market currencies by tracking the Bloomberg Dollar Total Return Index (read: 5 Outperforming Active ETFs of 2015).
In terms of holdings, the ETF allocates nearly 31.6% in euro while 30.1% collectively in the Japanese yen and Canadian dollar. The fund has so far managed an asset base of $236.2 million and sees an average daily volume of around 142,000 shares. It charges 50 bps in total fees and expenses. The fund has added 6.7% in 2015.
Market Vectors Indian Rupee/USD ETN (INR)
According to International Monetary Fund (IMF), India remained one of the few bright spots in the global economy in 2015. Reportedly, the economy expanded at a 7.4% pace in the July-September quarter, surpassing China’s growth rate and emerged as the world's fastest growing major economy. Increase in activities in sectors such as manufacturing, mining and services sectors were the main drivers behind this growth.
Moreover, economic policies including rate cuts by the Reserve Bank of India (RBI) along with several measures taken by the Indian government had a positive impact on the economy in 2015. These factors led the Indian rupee to be one of the leading major currencies worldwide against the dollar during 2015 (read: Best and Worst Performing Currency ETFs of 2014).
INR follows the S&P Indian Rupee Total Return Index to track the performance of the Indian rupee versus the U.S. dollar. The product is, however, quite unpopular and illiquid with an asset base of under $1.1 million and average trading volume of around 4,000 shares a day. The fund charges 55 basis points as fees and has returned nearly 4.7% in 2015. INR currently has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
Worst Currency ETFs of 2015
WisdomTree Brazilian Real Strategy ETF (BZF)
The Brazilian economy had a tough time throughout 2015. The economy contracted 1.7% in the third quarter, preceded by 2.1% GDP decline in Q2 and 0.7% contraction in Q1. Meanwhile, it is speculated that the economy is on the verge to register the worst contraction rate last year since 1901.
Factors including a decline in investment and household spending, a nearly 12-year high inflation rate and persistent slump in commodity prices had a negative impact on the economy. Also, weakness in China – one of the key trading partners of Brazil – affected Brazilian exports. In this scenario, the Brazilian real witnessed a decline against the U.S. dollar for the major part of 2015, which led the currency to be the worst performer against the dollar last year (read: Brazil Stocks, ETFs Ignore Slump: Rally on Rousseff Issues).
BZF seeks to achieve total returns reflective of both money market rates in Brazil available to foreign investors and changes in value of the Brazilian real relative to the U.S. dollar. Both AUM and average daily volume are paltry at $15 million and 15,000 shares, respectively. The product charges 45 bps in annual fees and lost nearly 22% in 2015. It has a Zacks ETF Rank #5 (Strong Sell) with a High risk outlook.
CurrencyShares Canadian Dollar ETF (FXC)
The Canadian economy witnessed a moderate contraction in GDP in the first half of 2015 before rebounding in the third quarter to register a positive growth rate. However, economic data including decline in the RBC Canadian Manufacturing Purchasing Managers’ Index (PMI) and dismal employment data indicated that the economy is suffering from sluggish growth conditions. Moreover, the slump in oil prices had a negative impact on the economy. These factors also affected the Canadian Dollar by a significant extent in 2015 (read: Commodity Currency ETFs in Trouble as Dollar Resumes Rally).
FXC provides investors exposure to the Canadian dollar relative to the U.S. dollar. It tracks the price of the Canadian dollar net of Trust expenses, which are expected to be paid from interest earned on the deposited Canadian dollars. As far as the fund’s structure is concerned, the product charges 40 bps a year in fees and sees moderate volume of about 53,000 shares a day. The ETF has accumulated $202.8 million in its asset base and lost about 15.7% last year. FXC has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
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PWRSH-DB US$ BU (UUP): ETF Research Reports
WISDMTR-BB USDB (USDU): ETF Research Reports
MKT VEC-RUPEE (INR): ETF Research Reports
WISDMTR-BRZ RL (BZF): ETF Research Reports
CRYSHS-CDN DOLR (FXC): ETF Research Reports
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