Currency exchange-traded funds of old are hedges against the dollar, but a new product from PowerShares and Deutsche Bank gives investors currency exposure that is designed to simplify the byzantine world of the interest rate-based carry trade.

The recently launched PowerShares DB G10 Currency Harvest Fund ( DBV) tracks the DB G10 Currency Futures Harvest Index, which follows the interest rates of the U.S. dollar, the euro, the yen, the Canadian dollar, the Swiss franc, the British pound, the Australian dollar, the New Zealand dollar, the Norwegian krone and the Swedish krona.

"When you ask whether it's a bullish or bearish dollar play, it's neither. It's really a currency strategy," says Kevin Rich, chief executive officer of DB Commodity Services, which is the managing owner of the Currency Harvest ETF.

"The index capitalizes on the trend that currencies associated with high interest rates, on average, tend to rise in value relative to those currencies associated with low interest rates," Rich says.

While the G10 index is a fairly new creation, the strategy is not. Investors have long used the "carry trade" to borrow currency in countries having low or zero interest rates, and to buy the currency-denominated assets in regions with high interest rates and higher returns.

To that end, the Harvest index looks at the three-month interest rates of the G10 currencies and goes long on the three with the highest rates and short on the three with the lowest rates. This gives investors a long-short strategy that the fund hopes will generate long-term returns from the currency markets.

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