Eleven For '11: Forex ETFs To Watch In The New Year

The term "currency war" has been pushed to the forefront of the investing lexicon in 2010 and while it may be up for debate that 2010 was the year of the currency war, it's never too early to have a look at what currency ETFs will be in play next year. Yes, looking at 11 forex ETFs encompasses a broad swath of the forex ETF universe, but as simple as it sounds, it pays to remember different currencies move for different reasons. Beyond that, some ETFs tracking major currencies are still undiscovered by many investors. Here's the ETF Professor's list of 11 Forex ETFs to Watch in 2011, in no particular order. 1) ProShares UltraShort Yen

: A strong yen has been a real thorn in the side of Japanese exporters this year, allowing Asian rivals to swipe market share. Japan knows this situation cannot persist and whatever actions are taken to weaken the yen make YCS an ETF to watch next year. 2) CurrencyShares Canadian Dollar Trust

: One of the premier commodity currencies, the Canadian dollar, also called the "loonie," is a direct play on oil prices. If oil touches $100 or higher, the loonie could reach parity with the greenback. 3) CurrencyShares Australian Dollar Trust

: Commodity currency the sequel. Rising gold prices should bolster the Aussie, but the Reserve Bank of Australia will need to continue its hawkish stance on interest rates if the Aussie is to make a legitimate run at parity with its U.S. counterpart. 4) WisdomTree Dreyfus Chinese Yuan ETF

: An obvious choice. The U.S. isn't going to relent in its rhetoric about a strong yuan. Beijing isn't likely to give up much ground in this fight either. Consider this the "soap opera" currency play. 5) WisdomTree Dreyfus Brazilian Real ETF

: A stout performer in 2010, the Brazilian real will be one to watch in 2011 as Brazil continues its battle against inflation. BZF would be one of the preferred picks on this list. 6) CurrencyShares Swiss Franc Trust

: What 2011 holds for the franc will be interesting to see. The Swiss don't want further appreciation against the euro, but if the PIIGS remain problematic, investors may flee to safer fare and that's exactly what the franc is. 7) CurrencyShares British Pound Sterling Trust

: As we noted on Monday, the outlook for sterling in 2011 is, well, sterling. Still, the pound is considered a riskier asset and Eurozone problems could be an issue here. 8) WisdomTree Dreyfus Emerging Currency ETF

: With exposure to 15 emerging markets, CEW is a direct play on the inflation that so many of these markets have to deal with. Expect CEW to be in play in a big way next year. 9) PowerShares DB US Dollar Index Bearish

: Another obvious choice. The impact of QE2 and rising commodities makes for a toxic brew for the dollar. 10) PowerShares DB G10 Currency Harvest ETF

: DBV is the carry trade for the average investor. The fund is long the three G10 currencies with the highest interest rates and short the three currencies with the lowest rates. 11) CurrencyShares Euro Trust

: Last, but certainly not least, this list would not be complete without the euro. Could 2011 be the year we see the first departure from the common currency? Either way, FXE is one to watch.