Investing in Foreign Currency Markets

[chinaco]

I see alot of buzz about foreign currency. I am wonderig how many of you are actually investing in foreign currency.

If you vote other, pleas place a comment to describe.



Also, please pace opinions and comments about whether or not you think it is good idea for the average individual investor to invest in currency.

[brewer12345]

Currency options and foreign bonds.

[mikew]

Indirectly using Foreign Bonds and
Other - Indirectly using Foreign Stocks (ETFs)

[DangerMouse]

We actually hold a large position in Australian $'s and UK Pounds that we acquired during our periods of residency in those countries.

[haha]

Quote:

Originally Posted by brewer12345 Currency options and foreign bonds.

Where do you buy foreign bonds? Everbank, or other broker or bank?

Ha

[brewer12345]

Quote:

Originally Posted by HaHa Where do you buy foreign bonds? Everbank, or other broker or bank? Ha

Funds. BEGBX or GIM.

[bpp]

Quote:

Originally Posted by chinaco Also, please pace opinions and comments about whether or not you think it is good idea for the average individual investor to invest in currency.

Depends on what the purpose is. Currency in itself is not much of an investment, with a zero expected return. On the other hand, foreign stocks and bonds have positive expected return.

I think foreign currency exposure is useful in general, for diversification purposes, but mostly as insurance. From a risk standpoint, the chances of one's base currency crashing and the rest of the world's currencies not doing so is greater than the risk of all the other currencies in the world crashing and one's base currency not doing so. For that reason I think it makes sense as insurance. But I would not do it because I specifically predicted my base currency to decline, since I don't trust such predictions in general.

Anyway, make sure your reasons will stand up to long-term scrutiny, and won't just lead to churning when the prevailing winds shift.

[Brat]

I am interested in the AU Currency ETF, yield about 4% last I looked. However, the AU equity ETF might be a play on both (it holds several AU banks).

Brewer, would you comment on the difference between buying a currency ETF and investing in a equity ETF in the same foreign country? There is expectation that interest rates will rise in the 3rd quarter in AU, since the equity ETF holds several banks one would expect that their profits would go down... don't know. Were thee me, thinking like a Norwegian widow, would you go for the currency?

[brewer12345]

Quote:

Originally Posted by Brat Brewer, would you comment on the difference between buying a currency ETF and investing in a equity ETF in the same foreign country? There is expectation that interest rates will rise in the 3rd quarter in AU, since the equity ETF holds several banks one would expect that their profits would go down... don't know. Were thee me, thinking like a Norwegian widow, would you go for the currency?

This is me thinking out loud (always dangerous), but I would imagine that the currency's movements would be predominately driven by economic growth, interest rate and inflation differentials, balance of payments, fiscal deficit (if any), etc. In contrast, I would expect the equities to be driven by their underlying fundamentals. So what is in the ETF? I dunno, but obviously banks, natural resource producers (coal, oil, iron ore), likely some retailers, etc. Australia's economy is pretty tied in to that of the Pacific Rim, and I know that Chinese, Indian, Korean and (to a lesser extent) Japanese commodity demands are keeping things pretty piping hot down there. Other than that, I am not too close a student of the Aussie economy, so I will decline to comment further.

I personally do not much like raw currency exposure. I'd rather have exposure to govt bonds in the currency of choice, or possibly equity exposure if you think that the economy in question is likely to show good growth and have healthy profits. Cash is cash, regardless of currency: typically a low return asset.

[JohnEyles]

Quote:

Originally Posted by brewer12345 Funds.  BEGBX or GIM.

Do you  consider either a good buy right now ?

I've got som IHYAX I think I want  to dump, and I need
some int'l bond exposure.

[brewer12345]

GIM is at a fat premium to NAV, so I wouldn't be eager to touch it. Nothing wrong with BEGBX.

[dex]

It might be a tad late to get into the FE market - the time was about 3 - 4 months ago - it is a fast moving market.

The euro was about 1.29 - now about 1.34 - what could it go to? 1.4 or 1.45

Australian Dollar was about .78 now .82 - what could it go to? .84 or .87