Dollar Strength Helps Investors Betting Against Euro

The dollar continues to get stronger against the Euro as concerns about inflation and slowing growth have now spread across the Atlantic.

Rydex’s Currency Shares Euro Trust (FXE), an ETF that tracks the Euro, has fallen dramatically since the beginning of August.

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One result of the change in the currency environment has been growth in assets and trading volume for the Market Vectors-Double Short Euro ETN (DRR).  The ETN has seen daily volume grow from 28,000 to 112,000 per day since August 1 and assets under management increase to over $50 million.  The asset growth has been helped by money flows into the fund.  According to Morgan Stanley, the number of shares of DRR has tripled since the beginning of August.

The Double Short Euro ETN is based on an index that is two-times leveraged.  For every 1% weakening of the euro relative to the U.S. dollar, the level of the Index will generally increase by 2%, while for every 1% strengthening of the euro relative to the U.S. dollar, the Index will generally decrease by 2%.