Turnover on ETF Securities' currency ETC platform surged 173 per cent in February to a record high.

As the European sovereign debt crisis spread over the past two months, investors have focused on taking short positions in EUR and GBP versus USD, with ETFS Short EUR Long USD and ETFS Short GBP Long USD making up 60 per cent of trading volumes and 35 per cent of AUM.

As a result of credit concerns amongst various EU member countries and a worsening outlook for the UK economy, both the EUR and GBP have been the worst performing G10 currencies versus USD in February and year to date.  

Currency ETCs that are long USD and short G10 currencies have seen the most interest from investors, making up 81 per cent of total assets.

ETFS Short EUR Long USD has been the most popular trade in 2010, capturing 73 per cent of new assets, while the Australian dollar held the most net long positions.

Currency as an asset class has also performed well relative to equities with the MSFXSM Long Australian Dollar Index up 27.8 per cent in the past three years, outperforming the S&P 500 index by 46.5 per cent over that period.

Currency ETCs provide long or short passive exposure to G10 currencies versus the US dollar or the euro, and also provide exposure to local interest rates in addition to FX movements. They are listed on the London Stock Exchange and will be listed on the Deutsche Borse (Xetra) this week.

Nicholas Brooks, head of research and investment strategy, says: "There has been a significant change in currency market sentiment over the past few months with sovereign risk starting to play a much more important role in driving FX performance. Concerns about Greece's sovereign debt and fiscal sustainability kicked off the crisis, but now it is spreading across other parts of Europe and across to the UK. With developed economy fiscal and debt positions likely to deteriorate into the foreseeable future, sovereign risk is likely to become a more permanent feature of the FX markets. Currency ETCs provide a convenient way to play these themes, providing both long and short exposures to a range of currencies."