ETF Spotlight: CurrencyShares Japanese Yen

ETF Spotlight on CurrencyShares Japanese Yen Trust (FXY), part of a recurring series.

Assets
$843 million

Holdings
This fund seeks to track the price of the Japanese yen.

Brief summary of the sector or area the fund covers: This fund began on Feb. 12, 2007, and tracks the national currency of Japan. Recent market volatility has sent investors in a flight to safety toward the yen, whose appeal has an inverse relationship with the appetite for risk. A low-yielding yen is a barometer for risk around the world, reports Lisa Twaronite for MarketWatch.

Until recently, the overriding theme in yen investing has been the carry trade, where investors borrow low-yielding currencies, and then invest them in assets denominated in higher-yielding currencies. This fund has an expense ratio of 0.40%.

What’s good

• If the risk-aversion continues, investors will liquidate their positions. Unwinding the carry trade benefits the yen, and in turn, this fund.
• Some experts and strategists feel that the yen will continue to be the strongest currency in the world.

What to watch out for

• While the yen has “safe haven” appeal, it’s not like other safe havens in that there’s no explicit guarantee backing a currency.
• The yen is backed by Japan’s account surplus, which remains strong, although it’s shrinking.

Read the disclosure, as Tom Lydon is a board member of Rydex Funds.

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