What Is a Currency ETF?

A currency exchange-traded fund (ETF) is a pooled investment that gives investors exposure to foreign exchange (forex) and currencies. They let investors profit from fluctuations in the exchange rates of one or more currency pairings. Currency ETFs, like other exchange-traded funds (ETFs), can be bought and sold on stock markets like other ETFs. The underlying currencies are generally kept in a single nation or a basket of currencies, and these assets are usually passively managed. Currency ETFs, like any other investment, come with their own set of risks and benefits.

The forex (foreign exchange) market is the largest market for trading currencies in the world. Currency ETFs offer a strategic exposure of investment to the forex markets via a portfolio of currencies. Investors who invest in these funds get exposure to foreign currencies and their capability to alleviate risks in the foreign exchange market.

The increasing popularity of currency ETFs provides investors with a perfect and economical way to indulge themselves in trading currencies in the regular trading sessions.