Comments on Currency Strategy

[bongo2]

I came across this strange fund: http://www.dbfunds.db.com/dbv/index.aspx

The idea is that you go long the three highest yielding currencies (among developed nations) and short the three lowest yielding. Past history and some academic research suggests that this will give you a 10% or so yield.

What do you think? Now that this is known about it will be gone? Or a true new asset class?

 

[d]

there's millions to be made (and lost) with currency speculation ... let us know how it turns out for you.

 

[bpp]

I'm dubious, for reasons found in the threads below, but am certainly no expert on this stuff. Maybe Brewer has some thoughts?

http://socialize.morningstar.com/NewSocialize/asp/FullConv.asp?forumId=F100000015&convId=185702
http://www.raddr-pages.com/forums/viewtopic.php?t=2509

 

[brewer12345]

This got kicked around the forum when it was first available. I looked at it, but I cannot see any compelling reason to buy it. There is some evidence that the reason the strategy historically made money had a lot to do with Japan's intentional maneuvers in the currency markets, a strategy that is no longer being employed. I think the world could have done without this particular ETF, but in 5 years we will see how it has done.