Percentage in Point

Posted: 05 Jul 2010 12:49 AM PDT

European nations' common currency is euro. In Forex, trading currencies fluctuate in value same like equity products. In simple words we can say currency trading is similar like products trading. That's why many traders invest their capital into currencies with expectation that valuations will rise. Euro is given broadly consideration in wide circulation which makes it feasible for investment. Investing in euro currency can be risky but its same as you invest in any other instrument.

Euro Currency

Things That You Should Know While Investing In Euro

First of all you will have to buy a certificate of deposit (CD) which is denominated in euro currency. You can buy that also in countries outside the euro zone; anyhow in most cases the CD is issued by a London-based authority. A euro CD works almost same like a CD using local currency, only difference is that in most cases the maturities are shorter in duration. A CD using local currency works for several years while euro CDs usually mature after less than one year. Despite of your location where you purchased the euro CD, the Bank of England regulates their guideline that's why policies and interest rates may vary from those in your native country.

By Using a brokerage account purchase shares of the FXE exchange-traded fund (ETF). Often stock markets list and trade ETFs which cover a wide range of investment vehicles not associated with the equity markets. The value of euro is tracked by the FXE fund and offers investment returns similar to the holdings of euro currency or CDs. Most of online brokers or any standard stockbroker account, will offer access to this ETF. This is most suitable alternative for those who do not ordinarily engage in currency investing. The shares trade like stock and may be bought and sold at anytime. Unlike a mutual fund, an ETF does not carry significant management fees, as there are not contracts or early withdrawal penalties. For all practical purposes the transaction is identical to buying stock.

If you want to directly trade units of euro currency then open a Forex account. Currency exchange trading through Forex is a highly leveraged way to gain exposure to the euro. Majority of Forex accounts carry margin ratios of only 1%, you can purchase up to one million units of euro currency for the same capital as would normally allow only 10,000 units to be exchanged. The traders who are having strong confidence in their strategy, this is the most rewarding way to speculate on the euro. But the risks often outweigh the benefits for most traders.

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