2. Safety Seekers Love China. In October of 2013, I recommended that currency ETF enthusiasts take a look at WisdomTree Chinese Yuan (CYB). The yuan/renminbi has risen steadily since 2006 against the U.S. dollar. Even though China monitors the extent that it will allow its currency to appreciate, there’s little reason to expect any changes to the basic dynamic; that is, the U.S. is maintaining an incredibly loose monetary policy here in 2014 when compared with China’s concern about inflation. In essence, even those who believe the dollar will strengthen against most developed world currencies in 2014, safe haven seekers believe that a portion of their cash should be in China’s currency.
In November, I offered another compelling way to play China’s currency as well as the safety of its government bonds. PowerShares Yuan Dim Sum Bond (DSUM) provides a reliable income stream on fixed income portfolio with short-term maturing bonds. Funds like iShares 1-3 Year Treasury (SHY) may provide a measure of safety for its 0.3% annualized yield, yet DSUM serves up closer to 3.0% with probable capital appreciation.