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FYI: Weakening overseas economies, coupled with the end of QE, has helped the dollar index rise After a weak start to 2014, the U.S. dollar has muscled its way higher this summer and the long-term gains may not be over. Regards, Ted http://wealthmanagement.com/print/mutual-funds/investing-rising-dollar
Maybe its just me but using a mutual funds to bet on currencies seems like an inefficient approach. There are enough ETFs available to buy or to sell currencies if someone wants and although I didn't check all of the funds referenced in the article the first one, the Rydex US Dollar Service has an expense ratio 3 times higher than the highest ETF expense ratio that I checked. ETFs also give someone the ability to buy or sell intra-day and they let you target the currencies you have an interest in. The same is true related to the Materials sector fund mentioned. That's pretty easy to target through an ETF if that's how you want to invest in the dollar. I suspect there aren't that many people who really want to invest in currencies anyway, but for me its not a long term bet or one I'd make through mutual funds.
Here's a related article with respect to a rising dollar and commercial traders who are 40% net short.
" If the commercial traders are correct about the dollar reversing course and heading lower in value, then this will have profound implications across multiple market segments. Commodities prices should rise, commensurate with the percentage amount of the dollar’s fall. Small caps should reverse their recent trend of underperformance which is correlated to the dollar’s outperformance; when the dollar is up, small companies have a tougher time competing in the international markets.
And a falling dollar should also mean rising CPI inflation rates."
Thanks @bee, this is very interesting! I'm not sure why they would be betting so big on that because I think the fundamentals support a stronger dollar and the technical situation is not bad either, although it wouldn't be surprising if there was a bounce rather than a trend change. I would be very happy for a small cap rally though because I have more than my fair share. I guess it might be why my international and emerging market small caps have done reasonably well recently as the dollar strengthens.
Comments
" If the commercial traders are correct about the dollar reversing course and heading lower in value, then this will have profound implications across multiple market segments. Commodities prices should rise, commensurate with the percentage amount of the dollar’s fall. Small caps should reverse their recent trend of underperformance which is correlated to the dollar’s outperformance; when the dollar is up, small companies have a tougher time competing in the international markets.
And a falling dollar should also mean rising CPI inflation rates."
commercials_betting_on_big_dollar_downturn/