With equity markets starting off the new year with a bang, investors are now looking to see which corners of the market are poised to perform well in 2013 and which investments they need to stay clear of. Though bonds and equities are usually an investor's main focus, currency plays are often overlooked as many shy away from this misunderstood asset class. Not surprising, currency markets thus far in 2013 have been highly active as countries around the globe continue to cobble together stimulus measures to prop up their lackluster economies. In general, the fate of an economy or any decision made by governments and central banks is closely linked to the currency market. As such, keeping a close eye on this corner of the investing universe may help investors better position themselves in 2013. Below we highlight this year's top currency trends, as forecasted by Merk Investments.

Gloomy Days for the Yen

For all simplicity purposes, the yen is indeed doomed, according to Merk Investments. Known for its dovish reputation, the Bank of Japan spent most of last year cobbling together trillions of dollars worth ofpatch-workedstimulus measures to boost the flailing Japanese economy. Despite its efforts, the nation's current account is dangerously sliding towards a deficit, which eventually will push the cost of borrowing to unsustainable levels. Japan's over 200% debt-to-GDP ratio is also a glaring red flag, leading many to be understandably bearish on the yen. For those looking to make a play on the seemingly doomed currency, there are several ETF options (both leveraged and non-leveraged) :

  • CurrencyShares Japanese Yen Trust
  • JPY/USD Exchange Rate ETN
  • ProShares UltraShort Yen
  • ProShares Ultra Yen

Diamond in the Rough: the Euro

No one can argue that the euro has had some rough times over the past few years as the region's seemingly never-ending debt crisis continues to plague the currency bloc. Merk Investments, however, believes that the euro may be the rock star of 2013, citing that regardless of the additional money-printing speculations, the balance sheet of the European Central Bank may actually shrink this year. Though such an event is highlyspeculative, many investors have already turned into closet bulls on the euro. Whether you can put your faith back into the currency or not, here are some of the most popular euro ETFs available:

  • CurrencyShares Euro Trust
  • ProShares UltraShort EuroETF
  • ProShares Ultra Euro ETF
  • Market Vectors Double Short Euro ETN

Uncertain Times for the Greenback

With Helicopter Ben indicating a pullback in the near future, Merk Investmentsbelievesthat the central bank's emphasis on employment (rather than inflation) may be a hindrance to the dollar, as growth is inherently dollar negative. Though the Fed has expressed its desire to keep the cost of borrowing as low as possible, an uptick in rates will eventually come, causing investors to be bearish on the bond market. In general, the dollar will likely see major swings this year as volatility in bonds is poised to rise in 2013. To make a play on the greenback, there are several exchange-traded options :

  • DB US Dollar Index Bullish Fund
  • DB US Dollar Index Bearish Fund
  • 3x Long U.S. Dollar Index Futures ETN
  • 3x Short U.S. Dollar Index Futures ETN
Disclosure: No positions at time of writing.

Related Articles
  1. Mutual Funds & ETFs

    ETFs Can Be Safe Investments, If Used Correctly

    Learn about how ETFs can be a safe investment option if you know which funds to choose, including the basics of both indexed and leveraged ETFs.
  2. Mutual Funds & ETFs

    The Top 5 Large Cap Core ETFs for 2016 (VUG, SPLV)

    Look out for these five ETFs in 2016, and learn why investors should closely watch how the Federal Reserve moves heading into the new year.
  3. Economics

    India: Why it Might Pay to Be Bullish Right Now

    Many investors are bullish on India for all the right reasons. Does it present an investing opportunity?
  4. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  5. Investing Basics

    Building My Portfolio with BlackRock ETFs and Mutual Funds (ITOT, IXUS)

    Find out how to construct the ideal investment portfolio utilizing BlackRock's tools, resources and its popular low-cost exchange-traded funds (ETFs).
  6. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  7. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  8. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  9. Investing

    3 Things About International Investing and Currency

    As world monetary policy continues to diverge rocking bottom on interest rates while the Fed raises them, expect currencies to continue their bumpy ride.
  10. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
RELATED FAQS
  1. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  2. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  3. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  4. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  5. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
  6. Can mutual fund expense ratios be negative?

    Mutual fund expense ratios cannot be negative. An expense ratio is the sum total of all fees charged by an asset management ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center