ETFs for a Weak Euro

By Eric Dutram of ETF Database

With continued worries over budget crises in the "PIIGS" (Portugal, Italy, Ireland, Greece and Spain) and their rapidly deteriorating fiscal conditions, the future of the eurozone's common currency has been called into question.

Most of attention has focused on Greece, where double-digit budget deficits threaten to grind the government to a halt and spread throughout the region.

While some are pushing for a Greek bailout, others worry about the signal this action might send to other troubled economies across the Mediterranean.

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Greece's richer counterparts certainly aren't happy about the idea of a bailout, especially Germany, where 53% of respondents to a recent poll demanded that Greece be thrown out of the eurozone if it can't solve its problems without outside funding.

Some are even calling for the end of the euro or are pushing for stronger members, such as France and Germany, to leave the common currency before it drags down their economies too.

On the other end of the spectrum, some economists have proposed that weaker countries, such as Spain, could actually benefit from leaving the eurozone. Such a move would permit a devaluation that would instantly increase global competitiveness and spur the national economy.

All of these concerns have chipped away at the value of the euro since it hit a 52-week high of $1.51 in late November. In fact, the euro has lost more than 10% against the dollar since the beginning of the year.

Although there are some obvious beneficiaries to a weak euro, such as PowerShares DB USD Index Bullish Fund(UUP), weakness in the currency could potentially impact several other ETFs as well.

Below, we highlight five ETFs that could be affected by the euro's future.

iShares MSCI Germany Index Fund(EWG)

As the second largest exporter in the world and by far the largest exporter in the European Union, Germany stands to greatly benefit from a weaker euro. As the French finance minister recently pointed out, a weak euro is good for exporters, and Germany's inclusion in the eurozone has likely prevented exports from becoming uncompetitive in the global markets.

EWG contains 51 firms that are based in Germany. Some of its largest holdings are industrial giants and exporters. Siemens(SI) (9.9%), pharmaceutical giant Bayer (7.4%), and BASF (6.9%) all have big allocations in the fund. The largest sector represented is financials at 18.6%, but industrials, materials and consumer discretionary firms combine to make up nearly 40% of the fund.