NEW YORK (ETF Expert) -- Nobody may have any interest in shorting the U.S. stock market right now. Yet, futures traders are growing increasingly excited about the prospect of shorting certain currencies.In particular, bets that the Japanese yen will fall against the greenback are at their highest levels since the summer of 2007. Granted, a contrarian might think that a high degree of short interest is an indication that Japan's currency could actually strengthen against the dollar. However, trend analysis suggests otherwise.
If you believe the British currency is due for a pullback and you like the prospects for British equities, you could consider the recently introduced db X-trackers MSCI United Kingdom Hedged Equity Fund ( DBUK). The dollar volume is a bit too light for my tastes, though I am looking forward to the day when DBUK has more assets under management. What about the euro? CurrencyShares Euro Trust ( FXE) took a noteworthy hit when the European Central Bank found itself with few alternatives; it lowered its refinancing rate to 0.25% last month. Nevertheless, FXE has been charting a path of higher lows since early July. That has made the unhedged Vanguard Europe ( VGK) stronger than WisdomTree Hedged Europe Equity ( HEDJ) for the last five months. On the other hand, if the European Central Bank continues making overtures to weaken the eurozone's common currency -- if you see value in European corporations that trade at lower price-to-sales ratios than their U.S. counterparts -- depreciation in FXE could herald outperformance for HEDJ.
Follow @etfexpert At the time of publication the author had no position in any of the stocks mentioned.