In the past, investing in foreign currency was the domain of sophisticated and institutional investors but the BetaShares U.S Dollar ETF (ASX: USD) now provides investors with perhaps the simplest, cheapest and most convenient way to gain exposure to the movement of the U.S dollar relative to the Australian dollar.
If the U.S. dollar rises relative to the Australian dollar, USD is expected to rise by approximately the same amount (before fees and expenses). The Fund can be bought or sold like any share on the ASX and thus investors don’t have to use complicated foreign currency trading platforms, trade CFDs or open a foreign-currency bank account.
The currency market is the largest financial market in the world with a turnover of approximately $3 trillion per day and the U.S dollar is one of the world’s most watched and traded currencies. One of the simplest ways Australian investors can look to take advantage of increases in the U.S currency versus the Australian dollar is with the BetaShares U.S Dollar ETF.
The BetaShares U.S Dollar ETF invests its assets in a wholesale U.S currency bank account. This simple structure provides investors with access to the currency’s performance at exchange rates that would otherwise only be available to the largest wholesale investors.
One of the most important benefits of the U.S. Dollar ETF is its cost-effectiveness. The annual management fee is equivalent to $45/year for every $10,000 invested. Other costs include the brokerage costs you incur when buying/selling the ETF. For most investors, the total costs of ownership will be significantly cheaper than alternative ways to get exposure to the performance of the U.S. Dollar.
Cost of A$10,000 investment over 6 months
1) Example using a Top 4 Australian Bank Foreign Currency Account (US$) with published rates/fees and spreads as at 23 March 2016.
2) Based on interest applicable to BetaShares U.S. Dollar ETF as of 23 March 2016. Interest rates variable and subject to change.
Source: Bank website, BetaShares. Figures presented are subject to change. Read the PDS at www.betashares.com.au and consider if the product is appropriate before investing.
In this example Bank Foreign Currency Account is over 10 times more expensive than using BetaShares U.S. Dollar ETF
Outside of taking a view on the performance of the U.S. dollar, another reason why investors look to invest in currency is that currencies have historically exhibited low correlation to equity markets and so can be a potential way to lower overall risk across a portfolio.
Think the US Dollar is due for fall? Or want to invest more tactically
Following the success of the BetaShares U.S. Dollar ETF, BetaShares has recently launched a pair of funds designed to provide investors with geared exposure to the AUD/USD trade, irrespective of whether they want to go ‘long’ AUD or ‘long’ USD. For more information see below:
- USD: U.S. Dollar ETF – provides simple, cost-effective exposure to the performance of the U.S. Dollar relative to the Australian Dollar
- YANK: Strong U.S. Dollar Fund (hedge fund) – geared exposure to the change in value of the U.S. Dollar relative to the Australian Dollar
- AUDS: Strong Australian Dollar Fund (hedge fund) – geared exposure to the change in value of the Australian Dollar relative to the U.S. Dollar