Profit From Forex With Currency ETFs: Risks

Some of the specific currency risks that come with currency ETFs include:

Political problems

National debt

Trade deficits

Interest rate changes

Government defaults

Changing domestic and foreign interest rates

Central banks or other government agencies selling the currency in large quantities

Commodity price changes

It is important to recognize these risks and the effect they could have on the price of your currency ETF. If you fail to recognize a new political leader as a threat to your rising currency, you could be out a lot of money in a few short days.

As ETFs have grown in popularity, there has been an equal growth in the variety of options opening up for investors. These investment vehicles allow us to both hedge and speculate against changes in currency prices. However, like all investments, there are risks, and it is imperative to understand them before jumping in.