Yuan ETF Faces Contango Issues

Investors looking for a way to play a strengthening Chinese Yuan should think twice before buying the WisdomTree Dreyfus Chinese Yuan Fund (CYB).

That’s according to the WSJ‘s John Jannarone in his column China ETF’s ‘Yuaning’ Gap.

Jannarone writes that CYB attempts to track the movements of the Yuan by taking positions in forward contracts. However, the forward contracts have already anticipated a strengthening Yuan (a market condition known as contango), effectively reducing the fund’s potential returns and frustrating efforts to track the currency’s movements in the spot market.

Video: The WSJ’s John Jannarone (2:25)

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