Currency ETFS

The Rand, as is its habit, is trading all over the place with the potential for big moves in either direction.

Knowing which way it’ll break is impossible, heck it could just remain range bound. This is always the challenge with our currency, when to move money offshore?

For me personally I stick to a planned schedule to move offshore as I also don’t want to miss out on opportunities for US$ investing.

But for those wanting to do a quick and easy hedge on the Rand against either the US$, Sterling or the Euro, Absa has three ETNs listed on the JSE that do just that.

They’re easy to buy in any JSE account, have cheap TERs and track the Rand pretty much in lock step.

There also perfect for hedging currency ahead of a over seas holiday or large purchase. Say you heading to Europe at year end and you see the Rand strengthening against the Euro. You can lock in the current strong level by buying the Euro ETN and exiting when it’s time to travel.

Absa NewWave currency ETNs

These are three Exchange Traded Notes (ETNs) from Absa that directly track the Rand against other developed market currencies.

They cover the USD, Euro and British pound. They basically trade 1:1 with the currency. So if you hold the US$ ETN and the Rand weakens to say R19.00/US$ the ETN will move to 1900c netting you a profit.

There are three of them listed below;

• NewWave EUR (JSE code: NEWEUR) | TER 0.1%
• NewWave GBP (JSE code: NEWGBP) | TER 0.2%
• NewWave US$ (JSE code: NEWUSD) | TER 0.1%

They’re simple and occasionally pay distributions from accrued interest, but this is not the main feature at all. We also note that the spread is generally fairly tight. A really nice and simple way to get offshore currency exposure but importantly as these are ETNs they can not be included in your tax-free account.

USDZAR | 12 June 2024

Simon Brown

At Just One Lap, we are big fans of passive investment using ETFs. In this weekly blog, we discuss ETFs on the local market and the factors you need to consider when choosing an ETF. If you have wondered how one ETF differs from another, this is where you can find out. We explain which index each ETF tracks, what type of portfolio could benefit from holding each ETF, and how the costs will affect your bottom line.