Excerpt from: Forex Analysis
|
 |
| December 01, 2006 | | Hedging with a diverse group of currencies in forex trading | Some investors are are turning to currency mutual funds to help them diversify their investment portfolios. This can also work as a forex trading strategy, as it can be used to hedge currency losses on the spot forex market, especially in terms of the U.S. dollar. MarketWatch reports:
In the past six months, assets have doubled at the 15
mutual funds and exchange-traded funds that focus on currencies, says
market tracker Lipper Inc.
The growth in hard currency fund assets
has been across-the-board, Lipper analyst Jeff Tjornehoj noted. "That
supports the view that investors aren't favoring one strategy over
another," he said. "They're concerned about the dollar's volatility and
trying to reduce their risks by adding different types of assets that
don't move in lock-step with stocks."
The U.S. currency has been under fire
over the past week, on growing worries that the Federal Reserve will
lower its interest rates to spur economic growth, while the European
Central Bank and the Bank of England will continue to lift rates to
curb inflationary pressures. ... Part of the increase in currency market investments is
no doubt due to a rash of new funds hitting the market in recent
months. The continued slide by the dollar against foreign currencies is
another driver.
While Tjornehoj says U.S. investors
still hold relatively small amounts of international stocks and bonds
in their portfolios, they are moving into such narrowly focused funds
to gain broader geographic exposure.
"By and large, most people buy stock and
bond funds to capture growth in markets outside the U.S.," Tjornehoj
said. "They're using currency funds to fill niches in their portfolios
and add a little more diversity."
At the end of March, nine dedicated
currency funds were on the market for retail investors. That has jumped
to 15 now, according to Lipper.  | Topic Tags: currency loses, currency mutual funds, forex trading, forex trading strategy, hedge currency, investment portfolios, spot forex market | |
|
|
