How to diversify out of sterling

Exchange-traded currencies (ETCs) are a great way to gain exposure to foreign currencies, whilst avoiding expensive bank dealing spreads. Paul Amery reports.

US equity-market volatility is, for now, back down to pre-crisis levels. Meanwhile, interest rates are pegged at near-zero in many major economies, and central banks are propping up bond markets through quantitative easing. But with all these artificial support measures underpinning equity and bond markets, volatility is increasingly likely to erupt elsewhere. Right now, some of that pent-up pressure is being released in the currency markets.

The US dollar has shot up against the Japanese yen by nearly 25% in six months. Sterling has dropped by 10% against the US currency since the start of the year. The euro has recently lost its shine too, topping out at $1.37 as recently as 1 February. This week it fell to below $1.29, in the aftermath of the Cyprus government's attempted raid on savers.

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Paul Amery

Paul is a multi-award-winning journalist, currently an editor at New Money Review. He has contributed an array of money titles such as MoneyWeek, Financial Times, Financial News, The Times, Investment and Thomson Reuters. Paul is certified in investment management by CFA UK and he can speak more than five languages including English, French, Russian and Ukrainian. On MoneyWeek, Paul writes about funds such as ETFs and the stock market.