Added a New Holding Today
I dipped my toe into the currency trade today with a small position in CurrencyShares Australian Dollar Trust (FXA), an ETF that tracks the Australian Dollar.
I had looked into different ways to trade currencies about a year ago and concluded that currency ETFs were the most expensive way to do this, but were the simplest for the small position I wanted to take. The cheapest way to do it is (I think) a foreign currency account with Forex, Interactive Brokers or another broker that offers fx accounts. In this case, I wanted a small position to diversify some of the cash in my IRA account - it really wasn't worth the trouble of opening a new account and moving funds whenever I might want to add or subtract from the position, so I went with the ETF.
The driver behind this is my belief that the US dollar is going to continue to drop. I picked the Aussie dollar because A$ short term rates are high and I don't believe the Reserve Bank of Australia is about to start printing money like the US Fed.
I probably haven't done enough homework yet to justify committing funds, but wanted some diversification to protect against a weaker dollar. And, this will prod me to actually do some more homework and get smarter.
I haven't entered this as a CAPS pick because I think any currency is unlikely to move enough to outpace the SPY benchmark used in CAPS and I don't have a lot of conviction on where the SPY is headed.
My main reason for posting this is to get feedback from fellow Fools who have opinions and/or expertise on where currencies, particularly the A$, are headed.