ProShares, a US-based provider of alternative ETFs, has announced the launch of the ProShares Ultra Australian Dollar ETF (GDAY) and the ProShares UltraShort Australian Dollar ETF (CROC).
GDAY and CROC are the first ETFs in the US to provide twice (2x) or twice the inverse (-2x) of the daily performance of the Australian dollar (AUD) spot price versus the US dollar (USD), respectively.
The funds use the 4.00 pm (Eastern Time) AUD/USD exchange rate as provided by Bloomberg, expressed in terms of US dollars per unit of Australian dollar, as the basis for the underlying benchmark.
The Australian economy, which underpins the Australian dollar, is heavily oriented towards the resource sector for growth and has benefited from strong commodities demand from fast-growing China, its largest trading partner. While this demand has weakened in recent months, the trend remains positive long term, providing support for the Australian dollar.
In addition, fiscal and monetary imbalances in many of the world’s larger developed countries may ultimately translate into long-term depreciation of their currencies. The Australian dollar is well placed to benefit from this trend.
However, there are suggestions that the Australian dollar is overvalued.
As central banks around the world have kept interest rates near zero and bond yields have slipped into negative territory, investors have sought higher yields wherever they can. With a base rate of 3.50%, this has created huge demand for Australian dollars, pushing up the currency, which in turn has begun to create problems for the country’s exporters. Eventually, these problems could translate into a weaker economy and, subsequently, a weaker currency.
With competing forces buffeting the Australian dollar, the outlook for the currency could be volatile. Either way, these latest ProShares ETFs provide investors with an efficient tool to hedge existing exposures or take advantage of tactical short-term trends.
Commenting on the launch, Michael L. Sapir, Chairman and CEO of ProShare Capital Management, the sponsor of the funds, said: ”The Australian dollar is one of the world’s most actively traded currencies. We are pleased to offer investors additional ways to manage risk or potentially take advantage of moves in this widely followed currency market.”
The introduction of GDAY and CROC brings ProShares’ lineup of geared currency ETFs to seven. The firm’s existing geared currency ETFs on the euro and the yen have garnered more than $1 billion of assets since launching less than four years ago. In total, ProShares has assets of nearly $22 billion.
Both are GDAY and CROC are listed on the NYSE Arca and come with an expense ratio of 0.95%.