SMSFs chasing currency ETFs as dollar weakens

Paralleling broader engagement trends in the exchange traded fund (ETF) market, SMSF investors have shown strong interest in currency ETFs in light of a falling Australian dollar.

As the dollar continues to weaken, SMSFs have become increasingly engaged with currency ETFs, which are designed to go up when the local dollar weakens against its paired currency, according to BetaShares.

“A lot of SMSF investors are looking to get exposure to foreign currency,” Alex Vynokur, managing director at BetaShares, told SMSF Adviser. “[SMSFs] are also using the currency ETFs for portfolio diversification and cost competitiveness.

“There has been strong interest from advisers and retail investors in our currency ETF products over the last two months, with significant net inflows and increased trading value,” he added.

Since the Reserve Bank of Australia (RBA) cut interest rates on May 8, the average daily trading value for the currency ETF suite has more than doubled compared with average daily values since the products’ inception, according to BetaShares.

“Inflows have also been substantial, with the three ETFs together gaining $53 million of net inflows since the RBA cut,” said Mr Vynokur.

Advisers are also using the US Dollar ETF for transition management, according to BetaShares.

“A number of Australian advisers have been paring back international equities positions in light of recent equity market volatility but [have been] wanting to preserve their US dollar currency exposure through a US dollar ETF whilst they wait for equity market volatility to settle down,” Mr Vynokur said.

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