Of course, that's not always the case. The Emerging Currency ( CEW), a basket of several emerging market currencies, hasn't had as much gain over the spot price due to negative implied yields on the Israeli shekel, Chilean peso, and Taiwan dollar. Traders expect those currencies to appreciate and have bid up the forward price. Currently, the CYB also has a slightly negative implied yield of 0.4%.

Finally, the forward contracts settle by an exchange of the difference in the value of these contracts. WisdomTree rolls these contracts monthly and uses five or six counterparties to minimize counterparty risk. WisdomTree charges 0.45% annually for the single emerging market currency ETFs and 0.55% for CEW.

The other major currency ETF issuer is Rydex CurrencyShares, which deposits the underlying currency with J.P. Morgan. Rydex's offerings are limited to the major currencies available to foreigners, so the only comparable funds are the WisdomTree Dreyfus Japanese Yen ( JYF) and CurrencyShares Japanese Yen ( FXY); WisdomTree Dreyfus Euro ( EU); and CurrencyShares Euro ( FXE). The returns for these ETFs have been similar; WisdomTree charges 0.35% versus 0.40% for CurrencyShares; CurrencyShares has hundreds of millions in assets in FXE and FXY versus about $10 million in EU and JYF.

Investing in currencies carries risk, and emerging market currencies carry more risk than average. Central banks are flooding the globe with currency to fight the financial crisis, and the chances of a major accident are not small. However, for investors who want to invest in emerging market currencies, the WisdomTree products work as advertised. You can check their holdings on the WisdomTree Website.

-- Written by Don Dion in Williamstown, Mass.
At the time of publication, Dion does hold positions in any of the equities mentioned.

Don Dion is president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.

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