At 9.2% year-over-year, U.S. producer price inflation in June spiked to the worst in 27 years. Prospects for American businesses, stocks and fixed-income investments remain suspect.
In this climate, the best-performing currency funds in the second quarter were those betting on currencies that performed relatively well versus the greenback.
The best-performing currency fund from March 31 to June 30 is the CurrencyShares Australian Dollar Trust (FXA). The fund is designed to measure the amount of U.S. dollars needed to buy an Australian dollar. So, as the U.S. dollar declines in value, it takes more and more of our dollars to buy the Aussie variety.
The spot value weakened by 4.75% in the second quarter, sending the fund up by 6.71%.The second-place currency fund is the CurrencyShares Mexican Peso Trust (FXM). As pesos per dollar shrank 3.13% for the period, this fund gained 5.18% on dollar weakness against the Mexican peso. Both of the above funds are direct plays on specific currencies. If the U.S. dollar strengthens against these two foreign currencies, then these funds are designed to lose money. On the other hand, this next fund tracks an index attempting to determine which currencies are set to appreciate. The third-place fund, PowerShares DB G10 Currency Harvest Fund (DBV) improved by 5.10% in the second quarter, tracking the Deutsche Bank G10 Currency Future Harvest Index. The theory behind the index is that currencies of countries with relatively high interest rates tend to rise while those of relatively low interest rates tend to fall. Futures contracts are bought for bullish currencies and sold short for currencies expected to weaken.
|Changes in Select World Currencies per U.S. Dollar|
|Spot Currency||Ticker||2nd Quarter Change||US Dollar|
|NEW ZEALAND DOLLAR||NZD||3.12%||Stronger|
|Best-Performing Currency Funds in the Second Quarter|
|Fund (Ticker) Rating||Total Return 2nd Quarter||Fund Type|
|CurrencyShares Australian Dollar Trust (FXA) A+||6.71%||ETF|
|CurrencyShares Mexican Peso Trust (FXM) A+||5.18%||ETF|
|PowerShares DB G10 Currency Harvest Fund (DBV) C+||5.10%||ETF|
|ELEMENTS Linked to the Australian Dollar/U.S. Dollar Exchange Rate ETN (ADE) U||2.67%||ETN|
|Barclays GEMS Index ETN (JEM) U||1.68%||ETN|
|iPath EUR/USD Exchange Rate ETN (ERO) A+||1.60%||ETN|
|CurrencyShares British Pound Sterling Trust (FXB) A||1.46%||ETF|
|CurrencyShares Canadian Dollar Trust (FXC) B+||1.02%||ETF|
|iPath Optimized Currency Carry ETN (ICI) U||0.93%||ETN|
|ELEMENTS Linked to the Euro/U.S. Dollar Exchange Rate ETN (ERE) U||0.92%||ETN|