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Foreign currency is widely accessible to individual investors. You can buy and sell currency pairs through forex trading platforms, banks, and even investment apps.
However, trading currencies involves significant risk and complexity. It's not the same as buying a stock and holding it. The foreign exchange (forex) market is fast-moving, highly leveraged, and influenced by global economic and political events.
Still, there are several ways investors can gain exposure to foreign currencies, ranging from direct trading to more diversified options.
Best Ways to Invest in Foreign Currencies
Whether you're a beginner or an experienced investor, there are multiple strategies to participate in the forex market — each with different risk levels and requirements.
1. Invest in Currency ETFs
Currency ETFs offer a more straightforward, hands-off way to gain exposure to foreign currencies.
Funds like the Invesco CurrencyShares Euro Trust (FXE) or the WisdomTree Emerging Currency Strategy Fund (CEW) track single currencies or a basket.
How to invest: Buy shares through any standard brokerage account, just like a stock or index fund.
Benefits: Easier to manage, no leverage required, and offers broader diversification.
Risks: Returns depend on currency trends and interest rate differentials; gains may be modest compared to active forex trading.
This is a good fit if you want currency exposure without the complexity of active trading.
2. Trade on Forex Platforms
You can invest directly in foreign currencies through forex trading platforms like FOREX.com, IG, or OANDA. These platforms let you trade currency pairs (e.g., USD/EUR, USD/JPY) by speculating which currency will rise or fall.
How to invest: Open an account with a forex broker, fund it, and place trades on currency pairs you want to speculate on.
Benefits: High liquidity and access to global currencies 24/5.
Risks: Forex markets are highly volatile and often use leverage, amplifying losses as quickly as gains.
It best suits active traders who are comfortable with short-term market movements and technical analysis.
Platform | Highlights | Best For |
|---|---|---|
FOREX.com | U.S.-regulated, strong charting tools | Beginners to advanced traders |
IG | Large global presence, great for international traders | Experienced traders |
OANDA | Low spreads, flexible lot sizes | Casual and frequent traders |
CMC Markets | Advanced platform, competitive pricing | High-volume and technical traders |
3. Use Currency Mutual Funds or Hedge Funds
Some mutual funds and hedge funds take strategic positions in foreign currencies, especially global macro funds. These are typically run by professionals who analyze geopolitical and economic trends.
How to invest: Buy into a mutual fund through a brokerage or gain access to a hedge fund (usually requires accreditation or high net worth).
Benefits: Professionally managed with potential for strong returns based on macroeconomic shifts.
Risks: Higher fees, limited transparency, and restricted access for average investors.
These funds work best for investors looking for active currency management without doing the trading themselves.
ETF Name | Focus Currency/Region | Issuer |
|---|---|---|
CurrencyShares Euro Trust | Euro | Invesco |
CurrencyShares Japanese Yen Trust | Japanese Yen | Invesco |
WisdomTree Emerging Currency Fund | Broad basket of emerging currencies | WisdomTree |
Invesco Chinese Yuan Trust | Chinese Yuan (RMB) | Invesco |
UUP – Invesco US Dollar Index Bullish Fund | U.S. Dollar vs major currencies | Invesco |
4. Buy International Bonds or Foreign-Denominated Assets
Fund Name | Type | Focus | Min. Investment |
|---|---|---|---|
PIMCO Emerging Markets Currency Fund | Mutual Fund | Currency-linked bonds & cash | ~$1,000 |
Rydex Strengthening Dollar Fund (RYSBX) | Mutual Fund | Bets on USD appreciation | ~$2,500 |
Bridgewater Pure Alpha Fund | Hedge Fund | Global macro (currencies, rates) | Accredited only |
Brevan Howard Macro Fund | Hedge Fund | Active currency and bond bets | Accredited only |
First Eagle Global Fund | Mutual Fund | Multi-asset incl. currency hedge | ~$1,000 |
You can also gain exposure to foreign currency by buying assets priced in non-U.S. currencies — for example, government or corporate bonds from Europe, Asia, or emerging markets.
How to invest: Purchase international bond ETFs or directly invest in foreign securities through a brokerage that offers global access.
Benefits: Generates income while gaining exposure to foreign currencies; often more stable than direct forex trades.
Risks: Currency fluctuations can erode returns, and foreign bonds may have different risk profiles depending on the issuing country.
This method works well for income-focused investors seeking long-term, diversified exposure to currency movements.
Alternatives to Direct Currency Investing
If you're not ready to dive into forex trading, there are other ways to benefit from currency movements:
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Invest in Multinational Companies
Firms like Coca-Cola (NYSE: KO) and Unilever (NYSE: UL) earn significant revenue overseas. A weaker U.S. dollar can boost their earnings when foreign income is converted back to USD.
This gives you indirect exposure to currency trends without having to trade them yourself.
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Explore International Stock ETFs
Funds like Vanguard FTSE All-World ex-US ETF (VEU) or iShares MSCI Emerging Markets ETF (EEM) include stocks from foreign countries and naturally expose you to the performance of other currencies.
Some ETFs are hedged to neutralize currency risk, while others are unhedged, offering full exposure to gains or losses from currency fluctuations.
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Gold and Commodities
Commodities like gold are often seen as hedges against currency devaluation. If you're concerned about the U.S. dollar losing value, holding physical gold or gold ETFs can help preserve purchasing power.
You can explore more in our guide to the best ways to invest in gold.
Product Name | Type | Currency Exposure | Issuer/Platform |
|---|---|---|---|
iShares International Treasury Bond ETF | IGOV | Developed markets, various FX | iShares |
SPDR Bloomberg Emerging Markets Bond ETF | EMB | Emerging markets, local currency | SPDR |
Invesco Intl Bond Fund (OIBAX) | Mutual Fund | Global exposure (USD-hedged) | Invesco |
Vanguard Total International Bond ETF | BNDX | Global ex-U.S. (hedged) | Vanguard |
FAQ
It can be risky due to volatility and leverage in forex trading, but beginner-friendly options like ETFs or currency-hedged funds offer safer entry points.
Yes, profits from currency trading or appreciation in currency-related funds are typically considered taxable income. It's best to consult a tax advisor for your specific situation.
Currency ETFs or international bonds are generally considered safer than direct forex trading. They offer stability and are often backed by real assets or diversified holdings.
Absolutely. Currency values fluctuate based on global events, interest rates, and economic data, which can result in losses just as easily as gains.
Higher interest rates in a country often strengthen its currency, attracting foreign capital. This is a key factor many investors monitor when trading or holding currency-related assets.
Yes, international bonds or currency mutual funds can pay interest or dividends while still offering exposure to foreign currencies.
Exotic pairs involve currencies from smaller or emerging markets. While they offer higher potential returns, they also carry much more volatility and risk.
Some banks offer multicurrency accounts, allowing you to hold and convert currencies. These accounts are good for travelers or those wanting passive exposure.
Not exactly. Trading is short-term speculation, while investing usually refers to holding currencies or currency-related assets for longer periods.
