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Top & Flop Currency ETFs of 2019

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The year 2019 will be remembered for sluggish global economic growth, dwindling export levels, easing monetary policies and most importantly, the twists and turns in the Sino-US trade war saga. However, as we walk to the end of the current year, it will be prudent to analyze the performance of some popular ETF areas like the currency ETFs on the bourses (read: Top and Flop ETFs of Last Week).

Currency ETFs:  Winners

Market Vectors-Indian Rupee/USD ETN INR — up 52% year to date

This fund has been the best performer among the currency ETFs so far in 2019. It tracks the performance of the S&P Indian Rupee Total Return Index minus investor fees. Exchange traded notes (ETNs) are unsecured debts issued by a bank. Being structured as an ETN, the fund gained in 2019 when the ETN was trading very high above its net asset value. However, it also suffered the Reserve Bank of India’s easing monetary policies that brought down the gains in 2019. INR has an AUM of $1 million and charges a fee of 55 basis points (bps) (read: Top & Flop ETFs Halfway Through Q4).

PowerShares DB US Dollar Bullish Fund UUP — up 5.3%

UUP is the prime beneficiary of the rising dollar as it offers exposure against a basket of six world currencies. It tracks the value of the U.S. dollar relative to a basket of the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. This is done by tracking the Deutsche Bank Long USD Currency Portfolio Index — Excess Return (DB Long USD Currency Portfolio Index ER) plus the interest income from the fund's holdings of primarily US Treasury securities and money market income, less the fund's expenses. The fund has so far managed an asset base of $257.2 million. It charges 79 bps in annual fees (read: Fed to Not Hike Rates in 2020: ETF Areas to Shine).

Let’s look at the factors that supported the greenback momentum in 2019. The U.S. economic fundamentals were steadily decent with a strong job market, increasing consumer spending, improving home building data and favorable manufacturing and services data. Also, Fed’s dovish stance on interest rates aided the fund.

After three rate cuts in 2019, the Fed hinted at keeping interest rates unchanged in 2020 unless there is any major alteration in the economic outlook. This lent some boost to the US equity markets. Moreover, the trade spat between the world’s two largest economies has been a major concern for global investors. However, certain positive developments raised optimism about resolving the trade issues (read: Beyond Biotech, 5 ETFs Up At Least 10% in Q4).


Invesco CurrencyShares Swedish Krona Trust FXS — down 7.5% year to date

The fund is designed to track the price of the Swedish krona. This is the national currency of Sweden and the currency of the accounts of the Swedish central bank, the Riksbank. Sweden’s economy is witnessing disappointing consumption and investment growth, thereby, keeping the Swedish krona weak so far in 2019.  FXS has so far managed an asset base of $14.7 million. It charges 40 bps in annual fees.

Invesco CurrencyShares Euro Trust (FXE - Free Report) — down 4.1%

The fund is designed to track the price of the euro, which is the currency of 19 European Union countries. Per FocusEconomics, high interest rate differential, slow GDP growth and trade feuds are keeping the euro weak so far in 2019. Moreover, it expects this weakness to persist in 2020 as well. Meanwhile, the fund has so far managed an asset base of $268 million. It charges 40 bps in annual fees (read: ETFs to Gain & Lose as ECB Starts QE, Cuts Rates).

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