ETF Plays For India's Interest Rate Hike

Following weeks of speculation that India would act to curb rising inflation in the world's second-fastest growing economy, the The Reserve Bank of India increased the reverse repurchase rate to 4.5% from 4% and the repurchase rate to 5.75% from 5.5%. There are a couple of ETF plays on the Indian Rupee that might be worth a look on this news. The WisdomTree Dreyfus Indian Rupee ETF (NYSE: ICN) uses currency contracts and currency swaps to create the effect of a money market account denominated in Rupees. The average contract maturity is 90 days or less. The Market Vectors Rupee/USD ETN (NYSE: INR) uses three-month currecny swaps to measure the Rupee's strength against the U.S. Dollar. INR rolls its swaps every three months. Both ETFs suffer from low liquidity and small asset bases, but if you're going to pick one, go with ICN due to the better liquidity.