Posted in Finance, Accounting and Economics Terms, Total Reads: 350
Definition: Euro ETF
An investment fund that is traded on the stock exchanges like regular stock is known as an Exchange-traded fund. Rytex Investments launched the first currency ETF called Euro ETF in 2005. It is an ETF which invests in the currency Euro directly or by holding euro denominated debt instruments of short term.
In most cases they are set as currency trusts or even grantor trusts. This implies that stakeholders have a fixed claim to a given amount of Euros per share. Since Euro is one of the highly liquid currencies, Euro ETFs are an attractive investing option for investors who are looking to gain from currency appreciation without having to enter the futures currency or foreign exchange markets. The opposite side, short position can also be taken as a bet that the Euro will depreciate as against the Dollar.
Unlike other ETFs, the Euro ETF has no underlying Index; instead they track the possible Euro/Dollar exchange rate minus the expenses. Some of these funds are not even eligible for long term capital gain. These funds pay regular dividends equalling the euro denominated (local) interest rate that is applicable to the short term government bonds or Commercial Paper.