Until relatively recently, currency trading was the domain of the exotic Forex markets, but now individual investors can participate in the currency and foreign exchange markets using Exchange Traded Funds.

Several ETF providers offer exposure to the currency markets and in this article were going to take a look at whats available to investors interested in this market.

Two of the largest fund families that offer currency related products anr Rydex and ProShares.

Rydex offers its Currency Shares suite that includes:

Currency Shares Australian Dollar Trust (NYSEARCA:FXA )

Currency Shares British Pound Sterling Trust (NYSEARCA:FXB )

Currency Shares Canadian Dollar Trust (NYSEARCA:FXC )

Currency Shares Euro Trust (NYSEARCA:FXE )

Currency Shares Japanese Yen Trust (NYSEARCA:FXY )

Currency Shares Mexican Peso Trust (NYSEARCA:FXM )

Currency Shares Russian Ruble Trust (XRU)

Currency Shares Swedish Trust (NYSEARCA:FXS )

These are all liquid and actively traded offerings that allow investors to go long a particular countrys currency.

The euro always generates lots of interest and for investors who believe the euro is destined to decline, one can look to the ProShares family for opportunities to short the euro.

Their primary offering on the short side is (NYSEARCA:EUO ) UltraShort Euro ProShares ETF, which aims to produce two times the inverse movement of the euro to the U.S. dollar. So as the euro declines this ETF is designed to go up at twice the rate.

And if you would rather invest directly in the fortunes of the U.S. dollar, you can take a look at two offerings from PowerShares, one bearish and one bullish.

For those who believe that the dollar is doomed, the PowerShares U.S. dollar Bearish ETF (NYSEARCA:UDN ) would be the one for consideration and if you feel that the dollar will rally going forward, then the PowerShares U.S. Dollar Bullish ETF (NYSEARCA:UUP ) would be the place to put your money to work.

A more sophisticated currency trading strategy is known as the carry trade that is used by currency traders all over the world. The strategy of this trade is to sell currencies of countries with low interest rates and buy currencies belonging to countries with higher interest rates. The idea here is that countries with higher interest rates will have stronger currencies and so those will appreciate while low interest rate countries will experience declines in the value of their currencies.

For retail investors who dont want to get involved in the currency markets directly, two ETFs are available that will essentially do the carry trade for you.

One is offered by PowerShares and is known as the PowerShares Currency Harvest (NYSEARCA:DBV ) and the other is the iPath Optimized Currency Carry ETN (NYSEARCA:ICI ).

To dig a little deeper, the iPath Optimized Currency Carry invests in high yield currencies using money borrowed from lower yielding currencies. This ETN focuses on the G 10 currencies that include the U.S. dollar, euro, yen, Canadian dollar, British pound and Swiss franc, among others.

So again we see that Exchange Traded Funds have opened new doors for investors into sophisticated strategies that were previously unavailable without large sums of capital and expertise. However, as always, one must do ones homework because this is still an area with tremendous volatility and particular care must be exercised for investors who choose the leveraged or inverse products. With adequate preparation and knowledge, even small investors can participate in foreign exchange, which is the largest financial market in the world.

Disclosure: No positions