5 Best Currency ETFs of May 2024 – Forbes Advisor

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5 Best Currency ETFs Of May 2024

Barbara FriedbergInvesting Expert Writer

Friedberg is a former investment portfolio manager, university finance instructor and author of three books including "Personal Finance; An Encyclopedia of Modern Money Management." Her work has been featured in national investment publications such as Forbes Advisor, Investopedia, U.S.News and World Report, Yahoo Finance, GoBankingRates and InvestorPlace. She is a regular panelist on the Money Tree Investing Podcast and owns BarbaraFriedbergPersonalFinance.com.

Barbara Friedberg

Barbara FriedbergInvesting Expert Writer

Investing Expert Writer

Rae Hartley BeckDeputy Editor of Investing and Retirement

Rae Hartley Beck first started writing about personal finance in 2011 with a regular column in her college newspaper as a staff writer. Since then she has become a leader in the Financial Independence, Retire Early (FIRE) movement and has over 100 bylines in prominent publications including Money, Bankrate and Investopedia on all things personal finance. A former award-winning claims specialist with the Social Security Administration, Rae continues to share her expert insider knowledge with Forbes Advisor readers.

Reviewed

Rae Hartley Beck

Rae Hartley BeckDeputy Editor of Investing and Retirement

Deputy Editor of Investing and Retirement

Reviewed

Updated: May 1, 2024, 11:46am

Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.

Currency ETFs provide investors with a simple way to invest in foreign exchange markets, where traders bet on the performance of different international currencies. This sophisticated investment class is not for the faint of heart, and it demands a good grasp on forex trading and currency futures, not to mention international politics and monetary policy.

Over the past three years, the strong U.S. dollar has been a fact of life in currency markets. The U.S. Dollar Index hit a two-decade high in September, 2022, although this key measure of the dollar’s value against major international currencies has come off its highs since then.

If you’re ready to make the jump into forex, a currency ETF is not a bad place to get started. Forbes Advisor has selected a short list of the best currency ETFs based on fees and returns. Note that we have also included one Bitcoin ETF on the list—while crypto has had a rough time recently, it could stand to profit if the dollar were to begin weakening against other global currencies.

Best Ofs

Show Summary

5 Best Currency ETFs Of May 2024

Invesco DB US Dollar Index Bullish Fund (UUP)

Expense Ratio

0.75%

1-Year Annual Return

8.52%

3-Year Avg. Ann. Return

6.86%

0.75%

8.52%

6.86%

Editor's Take

The Invesco DB US Dollar Index Bullish Fund is the largest currency ETF by total net assets. The fund tracks changes in the value of the U.S. dollar relative to major world currencies, including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and the Swiss franc.

UUP’s portfolio holds a wide range of U.S. Dollar Index futures contracts. Its decent performance over recent years reflects the strength of the dollar against international currencies. This fund is a solid choice for active traders who intend to stay on top of trends and want to employ strategies that depend on short trading and futures contracts.

WisdomTree Bloomberg U.S. Dollar Bullish Fund (USDU)

Expense Ratio

0.50%

1-Year Annual Return

7.69%

3-Year Avg. Ann. Return

5.54%

0.50%

7.69%

5.54%

Editor's Take

The fund name says it all: this is a great option for investors who are bullish on the U.S. dollar. The WisdomTree Bloomberg U.S. Dollar Bullish Fund can add diversification to a conventional stock and bond portfolio, thanks to the negative correlation between its returns and international stock and bond returns.

USDU invests in short-term currency futures and U.S. Treasury securities. It targets liquid currencies with the goal of providing total returns greater than the Bloomberg Dollar Total Return Index. The fund makes it easy for investors to capitalize on an appreciating dollar relative to foreign currencies.

Invesco CurrencyShares Japanese Yen Trust (FXY)

Expense Ratio

0.40%

1-Year Annual Return

-12.84%

3-Year Avg. Annual Return

-10.48%

0.40%

-12.84%

-10.48%

Editor's Take

There’s no reason to believe the strong dollar’s run is over yet, but the greenback can’t stay dominant forever. Many Japanese yen watchers like the yen’s prospects against the buck once the Federal Reserve’s rate hike cycle ends. And many experts expect one additional rate increase in 2023.

After that? That should clear the way for a rally by the yen, panelists for focus-economics.com say. That’s because the Bank of Japan has been loathe to keep the yen as attractive as the dollar by raising its rates. But once the rate gap between the two currencies stops widening—maybe even shrinking—then the yen ought to rally. And some signs point to growing Japanese public sentiment in support of at least modest Japanese rate hikes.

Should the yen rally, the Invesco CurrencyShares Japanese Yen Trust gives investors a convenient way of tracking the price of the Japanese yen in U.S. dollars. That would make FXY a good candidate for forex investors looking for a new bet.

Invesco CurrencyShares Euro Trust (FXE)

Expense Ratio

0.40%

1-Year Annual Return

1.36%

3-Year Avg. Annual Return

-2.69%

0.40%

1.36%

-2.69%

Editor's Take

The Invesco CurrencyShares Euro Trust tracks the price of the euro in U.S. dollars. Unlike the other funds on our list, FXE owns euros directly rather than via derivatives like futures contracts. If you believe that the euro could benefit from a weakening U.S. dollar, this could be a good tactical choice to add to an already diversified portfolio.

Like most of our currency ETFs, this is not a buy and hold forever ETF. Investors might choose FXE if they believe that the euro is undervalued versus the dollar. Should the euro strengthen, FXE will likely appreciate. Recent losses in the fund are due to the recent strength of the dollar.

ProShares Bitcoin Strategy ETF (BITO)

Expense Ratio

0.95%

1-Year Annual Return

112.04%

Avg. Ann. Return Since Inception (October 2021)

-4.36%

0.95%

112.04%

-4.36%

Editor's Take

Unlike the other funds on this list, the ProShares Bitcoin Strategy ETF aims to track the price of Bitcoin by trading futures contracts. Since its inception in October 2021, BITO has roughly mirrored daily BTC prices. BITO is the world’s largest and most actively traded Bitcoin ETF.

Bitcoin and the entire cryptocurrency market has had a rough time over the last year or so. As a result, BITO has not met its objective of capital appreciation since its inception. But if you believe that BTC could turn around and resume its upward trajectory, this fund offers a great way to play the trend without needing to actually own Bitcoins.

*All data sourced from Morningstar Direct, current as of April 3, 2024, unless noted otherwise.

Methodology

The world of currency ETFs is very small, with only 16 funds available. Of those, five are bitcoin funds. Among the 11 non-crypto funds, only ones that were long the U.S. dollar have seen positive returns recently, due to the enduring strength of the greenback versus global currencies.

Currency investors need to understand the concepts of “long” and “short” positions. Long means buying and holding an asset outright. It’s an appropriate strategy when you believe an asset will rise in value.

Short means borrowing an asset, in exchange for a modest fee, and then selling the asset. Short sellers believe that their target asset will decline in value, so that the investor can buy it back later at a lower price, and thereby make a profit.

For this list, we selected the five largest currency ETFs by assets under management. It includes two long dollar funds: The Invesco UUP is long the U.S. dollar and short a basket of G10 countries, while the WisdomTree USDU is long the U.S. dollar and short a smaller basket of global currencies. These were the only currency ETFs with positive three and five year performance.

The remaining three funds—a Bitcoin fund, a long euro fund and a long yen ETF—have seen losses recently thanks to dollar strength. Should the current trends reverse, they could be poised to profit.

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Barbara Friedberg

Investing Expert Writer

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