ETFS to unveil 22 currency ETCs

ETF Securities (ETFS) is due to unveil 22 currency exchange-traded commodities (ETCs) on the London Stock Exchange in the coming weeks.

Four of the new products are based on emerging market currencies, while the remaining 18 are GBP-based currency products.

ETFS says this is the first time in Europe investors will have access to emerging market currency ETCs, allowing them to go long or short the Chinese renminbi or the Indian rupee.

ETFS chief operating officer Nik Bienkowski says: "With today's financial crisis continuing and the poor performance of equities over the past ten years, we've seen that investors are looking for liquid and transparent markets and thus currencies are starting to appear on their radar screens."

London Stock Exchange Group head of fixed income Pietro Poletto says: "Currencies like the Indian Rupee and the Chinese Remnimbi, not previously tradable on a stock exchange, can now be traded in a new way in the world's foreign exchange capital."

ETFS says many emerging market currencies are not accessible to foreign investors due to certain restrictions. Consequently, foreign investors can tap these markets through Non Deliverable Forward (NDF) contracts and currency ETCs.

However, NDF markets are affected by factors such as expectations of the relevant exchange rates and central bank policies.

As a result, even though the Chinese renminbi is linked to the US dollar, it is possible for emerging market currency ETCs to change in price.

The firm will also launch 18 long and short developed market G-10 currency ETCs versus GBP, adding to the 28 long and short G-10 currency ETCs versus the US dollar and euro.

These allow local investors to take long or short exposures against the British pound, which is currently being depressed by debt and default concerns.

The currency products are based on Morgan Stanley FX (MSFX) indices, which comprise a fully collateralised long or short investment in either deliverable forward contracts in relation to developed economy currencies or NDFs for emerging market currencies.