Market Analysis : Currency Etf

1234 WordsNov 2, 20155 Pages
With the growing popularity of ETF 's, investors have found it very easy and relatively inexpensive to trade currency ETF 's to take advantage of fluctuations between currencies. Currency ETF 's are purchased to track most international currencies including the U.S. Dollars, Canadian dollars, and Mexican peso. Currency ETF 's aim to replicate movements in currency in the foreign exchange market by holding currencies either directly or through currency-denominated short-term debt instruments. Launched in 1996 the iShares MSCI Mexico Capped ETF (EWW) is the most popular and common ETF, offering retail investors an immediate approach to gain exposure to an extensive scope of Mexican equities. It tracks the MSCI Mexico IMI 25/50 record. This…show more content…
The peso had been at 12.5 to 1 dollar for around 22 years, from 1954 to 1976. In 1976, the Mexican peso decreased from 12.5 pesos to 1 dollar to 22 pesos to the dollar and continued to depreciate against the U.S. Dollar during the next 16 years, to end up in December 92 at more than 3000 pesos to 1 U.S. Dollar. In January of 1993, to ease foreign exchange, the government introduced the new peso, worth 1,000 of the old and divided into 100 centavos. Extreme international demand for Mexican stocks and high-yielding two-year treasury certificates known as CETES, kept the New peso at a reliable level of 3.1 New pesos per U.S. Dollar for most of 1993. The Mexican peso declined as losses in bonds supported by United States subprime home loans led investors to avoid higher-yielding securities. The peso slid 1.6 % in 2006. Defaults on bonds supported by United States subprime mortgages triggered $80 billion in write-downs and losses at the biggest banks and securities firms that year. In 1990 one U.S. Dollar exchanged on average for 2.8 Mexican pesos. By 2007, the peso had fallen against the dollar by almost 75 %, with an average exchange rate in 2007 of 10.9 pesos per dollar. Mexican products did not become cheaper compared to US products over that 17- year period nor did the price of Mexican products expressed in terms of U.S. Dollars fall by 75% because Mexico had much higher inflation than the United States over that period. In fact, the relative price of U.S. and
Open Document