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ETF Trading Report: Yen, Silver ETFs in Focus

Eric Dutram

U.S. stocks had a mixed session in Wednesday trading as all eyes were on the Fed minutes which were released about halfway through the day. In the release, it looked as though the FOMC was getting ready for another round of bond buying, setting the stage for QE3.

“Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.”

Given this new data, many investors believe that now the Fed will act sooner rather than later and embark on a new campaign of bond purchases. Thanks to this, both the S&P 500 and the Nasdaq finished the day in the green although the Dow did lose about 0.2% on the day (see the Guide to Retail ETFs).

Sectors were mostly mixed, although investors did see some weakness in the broad tech market and the consumer product segment, while energy and a few health care names did surprise to the update. Meanwhile, firms in the home construction or supply business had a banner day, while Apple continued to impress, adding another 2% on the day.

The dollar was again weaker in Wednesday’s session as the greenback fell against the European currencies although it did see some resistance in the yen market. Additionally, the prospect of more bond buying helped to push yields down again on the 10 year, as rates fell about 10 basis points down to the 1.7% mark (read Why It Is Time for the Brazil Infrastructure ETF).

Commodities were also a big winner thanks to the weakened dollar, as markets broadly rose in the natural resource trade. All the energy products were up along with the metals, while most agricultural commodities slumped, led by a 2% loss in the cocoa market.

In ETF trading, volume finally reached normal levels today in many equity products, although some of the more specialized sector and capitalization level ETFs were a little light once again. In terms of big trades, commodity ETFs dominated the scene while a few of the global and currency funds also saw large moves as well.

In particular, ETF investors saw an outsized level of interest in the silver market, especially with the PowerShares DB Silver ETF (DBS). This fund saw roughly 10 times as many shares move hands today while other silver ETFs also saw modest increases in volume as well (see Time to Consider The Silver Miners ETF).

Clearly, the interest in the product is coming as silver is finally bouncing off of its 2012 lows and is once again testing multi-month highs. Additionally, DBS was up over 2.3% today, a level that is likely to attract some attention given the lackluster performance in the rest of the market.

Another segment that saw a great deal of popularity in today’s trading environment was the CurrencyShares Japanese Yen Trust (FXY). This product usually does about 160,000 shares in a normal session but saw volume spike to just over 1.65 million shares in Wednesday’s session (read Five Cheaper ETFs You Probably Overlooked).

The outsized volume was also seen in the short-yen products as well, although it should be noted that FXY saw most of its volume right after the FOMC minutes release. This means that some investors were probably just riding the wave of volatility in the currency market, but also that much of the betting on the yen is based on how investors think the dollar will move over the coming days, instead of on Japanese fundamentals.

(see more in the Zacks ETF Center)

Read the analyst report on DBS

Read the analyst report on FXY

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