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Top-Performing Currency ETFs of First-Half 2020

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The first half of 2020 has been marked by the coronavirus outbreak and the resultant seesaw ride in various asset classes. While recession fears weighed on risky assets and boosted the safe-haven ones at the start of the coronavirus pandemic, a splurge of economic stimulus boosted risk-on sentiments in later on.

Against this economic backdrop, below we highlight a few top-performing currency ETFs of the first half of 2020.

U.S. Dollar

Despite a super-dovish Fed, the greenback has been the top-performer this year.  The reason for the rally is the U.S. economy’s improved position among developed markets and the greenback being viewed as a safe-haven asset. Investors sold their possessions to  retain money in U.S. dollars at the start of pandemic-induced lockdown due to the unparalleled uncertainty caused by the virus  contagion (read: U.S. Dollar Climbs: ETFs to Gain/Lose).

Though the currency jumped at the start of the year, an improving virus outlook, easing lockdowns and a trillion-dollar stimulus announcement by the Fed cut some strength off the U.S. currency in recent weeks. Overall, WisdomTree Bloomberg U.S. Dollar Bullish Fund (USDU - Free Report) (up 2.36%) and Invesco DB US Dollar Index Bullish Fund (UUP - Free Report) (up 0.7%) are the top-performing greenback ETFs so far this year (read: Winning ETF Strategies To Fight A Weak Dollar).

Swiss Franc

The Swiss franc climbed to its highest in more than two months versus the greenback in early June. Swiss franc is often viewed as a safe-haven asset. Swiss GDP shrank 2.6% sequentially in 1Q20 due to the adverse effects of the coronavirus-led lockdown. While the rate of decline was a record for the country, it was quite less compared with many other global superpowers. Invesco CurrencyShares Swiss Franc Trust (FXF - Free Report) hasadded 1.94% this year.

Yen

Due to the coronavirus pandemic, demand for safe-haven assets like yen remained high. Invesco CurrencyShares Japanese Yen Trust (FXY - Free Report) gained 1.67% in the first half of 2020. GDP growth-wise too, the Japanese economy appeared better positioned. The Japanese economy contracted 0.6% sequentially in Q1 2020 compared with the preliminary estimate of a 0.9% shrinkage and market consensus of a 0.5% decline. This also explains the strength in the Japanese currency.

Euro

Euro has not succumbed to massive losses this year despite ultra-dovish ECB and a QE policy that is in place since late last year. The massive stimulus announcement kept the currency charged up amid the pandemic. The latest driver of the euro strength was the proposal of the European Commission for launching a new 750-billion-euro recovery fund dubbed under “Next Generation EU.”

Moreover, the Eurozone economy contracted by 3.6% sequentially in the first three months of 2020 compared with preliminary estimates of a 3.8% contraction. The latest volley of upbeat economic data points has also supported the currency. Invesco CurrencyShares Euro Currency Trust (FXE - Free Report) hasadded about 0.4% in the first half of 2020.

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