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With weak employment reports in the U.S ., lackluster growth numbers in China and the seemingly endless euro-zone crisis, the global economic outlook is decidedly gloomy.
For investors trying to protect themselves from the gathering storm, currency investing — especially through exchange traded funds, — can play an important role, says Laurence Wormald, head of research at SunGardAPT.
“They are good hedges for investors who aren’t able to play directly in the currency markets ,” through futures or other instruments, he says.
There are more opportunities to express bullish economic views than bearish ones through currency ETFs, but investors looking for protection from a downturn still have reasonable options.
The key is to focus on currencies that are behaving like safe havens — strengthening when the news is bad, and vice versa. These days, given the debt turmoil in the E.U., that would be the dollar and the Japanese yen.
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