ETFs To Bet (Hedge) Against The Euro

  • Shorting the euro is traditionally accomplished by borrowing a set number of euros and immediately exchanging them for a different currency with the goal of repurchasing it at a lower relative valuation.
  • The easiest way to short sell the euro is by using ETFs with built-in leverage, since the currency markets require significant leverage and expertise.

The two most common ETFs to short the euro are:

  • ProShares UltraShort Euro ETF (NYSE: EUO)
  • Market Vectors Double Short Euro ETN (NYSE: DDR)

Though EUFX becomes the first -1x Euro ETF, there are a handful of products that can be used to hedge against the struggling currency. As mentioned above, ProShares already offers an ETF (EUO)
(ProShares UltraShort Euro seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the U.S. Dollar price of the Euro.)

that delivers -2x daily exposure to the euro. PowerShares additionally offers a USD Index Bullish (EUFX – Short Euro) (This ETF seeks to track the inverse of the U.S. dollar price of the euro. )that seeks to replicate being long the U.S. dollar relative to a basket of developed market currencies, including the Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc. Because the Euro represents a significant portion of the underlying basket, UUP often depends primarily on that currency.

One indirect way to hedge against a decline in the euro is the MSCI EAFE Currency Hedged Equity Fund (DBEF), which offers exposure to a basket of developed market stocks that includes a number of European economies. Unlike funds such as EFA or VEA, however, DBEF strips out the exchange rate exposure, meaning that a decline in the value of the euro won’t have an adverse impact on U.S. investors.

Here are four ETFs that are long the euro:

  • CurrencyShares Euro Trust (NYSE: FXE)
  • WisdomTree Dreyfus Euro (NYSE: EU)
  • Ultra Euro ProShares (NYSE: ULE)
  • Market Vectors Double Long Euro ETN (NYSE: URR)

There are a number of ETFs that allow investors to bet on an appreciation of the euro relative to the greenback, including FXE, ERO, and URR (2x)(As the Index is two-times leveraged, for every 1% strengthening of the euro relative to the U.S. dollar, the level of the Index will generally increase by 2%, while for every 1% weakening of the euro relative to the U.S. dollar, the Index will generally decrease by 2%. ).

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