YOUR MONEY-Cash Out: why some investors hold foreign currencies

Mon Oct 21, 2013 1:47pm EDT
 
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By Chris Taylor

NEW YORK Oct 21 (Reuters) - You've heard of Doomsday Preppers: folks who think cataclysmic events are on the way, and who want to be prepared by stockpiling resources.

Now meet the Currency Preppers.

With government dysfunction on full display in Washington, and the Federal Reserve continuing its policy of bond buying known as quantitative easing, some investors are feeling highly unsettled about the future of the U.S. dollar, which hit eight-and-a-half month lows on Friday against the euro and a basket of foreign currencies. So much so, they have decided to hold some cash in foreign currencies.

Investors like Bernie Koerselman. The 78-year-old from Surprise, Arizona has an Australian dollar deposit account with Jacksonville, Florida-based EverBank, and in the past has owned currencies like the Brazilian real and the Canadian dollar.

"I think it's inevitable the U.S. dollar is going to depreciate significantly in value," Koerselman says. "We're printing money like there's no tomorrow, and we're losing our status as the world's reserve currency. I don't see any way out."

Koerselman isn't alone in keeping a little cash in foreign denominations. According to Chicago-based research firm Morningstar, investors hold roughly $3.3 billion in currency exchange-traded funds - about $2 billion of that in single-currency products, and the rest in baskets of multiple currencies.

Among those with the biggest year-to-date inflows: the CurrencyShares Japanese Yen Trust, and the Market Vectors Indian Rupee/USD exchange-traded note.   Continued...