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Foreign Exchange

Rydex launches renminbi ETF

Rydex SGI has launched an ETF tracking the Chinese renminbi – the CurrencyShares Chinese Renminbi Trust.

Chinese Renminbi Trust is the 10th exchange traded product in the CurrencyShares stable, alongside others tracking the Australian and Canadian dollar, sterling, euros, yen, Swiss franc, Swedish krona, Mexican peso and the rouble. Rydex plans more launches in the near future, it added, although it declined to disclose which currencies would be next.

CurrencyShares ETFs give investors exposure to currencies by holding cash deposits, not derivatives, making them a pure currency play, unlike most other ETFs.

The Chinese Renminbi Trust holds renminbi-denominated deposits in a JP Morgan account in London. Holding renminbi outside China was impossible until last year, which is one reason why Rydex did not launch the ETF earlier, says Anthony Davidow, managing director and portfolio strategist at Rydex.

The ETF itself is priced in dollars.

China is the second-largest economy in the world, and one of the fastest growing big economies. Many believe its currency is significantly undervalued, with Chinese authorities artificially holding it down to stimulate the economy. “There is a lot of pressure on China to let the renminbi rise and if they allow it to happen we believe it could rise by 20% to 25%,” says Davidow.

Rydex claims to offer the industry’s widest range of currency-linked ETPs, collectively representing nearly $4bn in assets. The CurrencyShares Euro Trust was the first currency ETF in the US, launched five years ago.

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