FXA offers direct exposure to the AUD by holding physical dollars in a deposit account at JPMorgan. The fund does a great job of providing exposure to the Aussie dollar and its corresponding interest rate through its simple structure. However, unlike a retail checking account in the US, the funds AUD deposits are uninsured. As a result, investors are exposed to the default risk of JPMorgan, the fund's depository bank. Tax efficiency is another concern, any distributions or sales of FXA shares are taxed at ordinary income rates, regardless of holding period. FXA is rebalanced quarterly.
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