Currency ETFs
 

I was recently thinking about ways to lock in the current exchange rate for US dollars to euros and pounds, in anticipation of trips to Europe later this year and next year. Since I have an online brokerage account with reasonably low trading commission rates, I thought of buying currency ETFs (exchange-traded funds) such as those offered by Rydex. I figure there isn't much doubt that at some point in the future, the dollar will significantly lose value against the euro and the pound. If that happens before my trips, then I can sell the ETFs and the profit will offset the lower value I would be getting for my dollars. If the dollar doesn't lose significant value before I take my trips, then I would hold onto the EFTs until the dollar does fall, and in the meantime my dollars would retain their value for my travels. Any thoughts or opinions on this?

Hi luv,

>...I would hold onto the EFTs until the dollar does fall.<

The Euro just jumped up to $1.37.

What if it goes back to $1.25?

>I figure there isn't much doubt that at some point in the future, the dollar will significantly lose value against the euro and the pound.<

Can you tell me exactly when this will happen? I'd be happy to buy E the day before and sell them the day after.

((I))
Who suggests that you leave currency trading to the currency traders.

Hi Ira,

>What if it goes back to $1.25?

Then I would hang on to the ETF, and exchange my dollars at $1.25 while in Europe. Although in all honesty though, I don't think I'd go the euro route, based on its trading range since inception. The pound, on the other hand, I do have confidence that it is still near the low end of its historical trading range.

But the same thing applies, if the pound falls, I hold on to the ETF, and enjoy the favorable exchange rate while traveling in the UK.

I do appreciate your thoughts, though. Anyone else?

Is your vacation spending so significant that you find it necessary to hedge your fx exposure? I can't imagine it is, and so I wouldn't make any investment decisions out of a desire to hedge that spending.

Of course, you may find that you want to add ETFs to your broader portfolio, but I would make that decision in the context of that broader strategy.

Hi luv,

>>What if it goes back to $1.25?

Then I would hang on to the ETF,.....<

Hoping for it to someday go back to $1.37. :)

>The pound, on the other hand, I do have confidence that it is still near the low end of its historical trading range.

But you don't know how low it will go, right?

Did anyone predict the sudden jump in the Euro from $1.25 to $1.37?

Did anyone predict that when the Euro came out at $1.18 it would drop to $0.87?

Did anyone predict that it would rise to $1.50?

Did anyone predict that oil would drop from $140 to $40?

Ditto TG. :)

((I))

PS:

Many years ago, I visited Europe in August.

Prior to the trip, I studied the fx charts, and determined that, for the prior 10 years, the USD always rose during the Winter and fell during the Summer, when all of the US tourists went abroad.

So I bought various currencies in the Winter.

Of coourse, that year the USD continued to rise right through the following Spring.
:)

((I))