This is a currency product that tracks the exchange rate of the Canadian dollar against the US dollar. It is structured to hold physical Canadian dollars in a deposit account, so it tends to rise when the CAD strengthens against the US dollar.

It suits investors who expect the Canadian dollar to strengthen, those who want to diversify their US dollar exposure, and those who want exposure to a commodity currency.

It is a passively managed (index-tracking) ETF run by Invesco.

By holding physical Canadian dollars in a deposit account, the fund directly reflects changes in the CAD exchange rate against the US dollar. It has a simple structure with no futures or derivatives, and any interest earned on the deposit account is distributed to investors.

• Simple structure based on physical currency deposits
• Direct exposure to the Canadian dollar against the US dollar

Assets under management (AUM) stand at $66.3M, and the total expense ratio is 0.40% per year.

Unlike derivative-based products, it gives direct exposure to the currency exchange rate without futures roll costs.

The value of the Canadian dollar tends to move with commodity prices such as crude oil and with the interest rate differential between the US and Canada, so the exchange rate has shown a pattern of volatility linked to these macro variables.

Fund flows diverge depending on the commodity cycle and the direction of North American monetary policy, and in periods of dollar strength, demand for currency diversification shapes the market environment.

Its strengths are dollar diversification and commodity currency exposure, while its weakness is that performance depends on a single factor, the exchange rate.

The products shown in the table belong to the same Invesco currency trust family. They provide exposure to the Swiss franc, Japanese yen and Australian dollar respectively, or, conversely, bet on US dollar strength. In addition, products such as FXE, which is exposed to the euro, FXB, which is exposed to the British pound, and UDN, which bets on dollar weakness, can also be considered when building a currency portfolio, and combining the direction of exposure for each currency can help achieve diversification.

These are points to review before investing in FXC. Currency ETFs are largely directional bets on exchange rates, so you should clarify your purpose and holding period in advance, and also look at macro variables such as the commodity cycle and interest rate differentials.

A single exchange rate factor and the link to the commodity cycle are the main sources of volatility. If the direction goes against you, losses can accumulate regardless of the holding period, and in a low-rate environment, deposit interest is low, which may limit real returns.

This is a currency ETF suited to investors who want Canadian dollar exposure and diversification away from dollar assets. If your directional outlook is not clear, it is advisable to keep the allocation limited.