WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) was down sharply for the second day as the Nikkei 225 Index dropped Thursday and the yen spiked against the U.S. dollar.
DXJ fell nearly 5% in U.S. afternoon trading Thursday. The popular ETF is designed to hedge its currency exposure to the Japanese yen.
The iShares MSCI Japan (NYSEArca: EWJ) was off 1.5%. EWJ doesn’t hedge its currency exposure to it will outperform DXJ when the yen strengthens versus the U.S. dollar, and vice versa.
CurrencyShares Japanese Yen Trust (NYSEArca: FXY) rallied 2.7% at last check, a huge move for a currency ETF. Trading volume in FXY surged on Thursday.
Currency markets were chaotic on Thursday after the European Central Bank kept interest rates unchanged and ECB President Mario Draghi didn’t offer any hints of further stimulus measures. On Friday, investors will get the U.S. jobs report for May.
The yen has been rising and the Nikkei falling since Japanese Prime Minister Shinzo Abe’s speech earlier this week. [Japan ETFs Back in Focus After Abe Speech]
“Shares are being sold because Abe’s plan didn’t have any surprises that meet overblown expectations in the market,” said Takahiro Nakano, a senior strategist at Mizuho Trust & Banking, in a Bloomberg News report.
Abe’s proposals “are not enough for Japan to achieve sustained economic growth and overcome deflation,” said Hisashi Yamada, chief economist at the Japan Research Institute, in a WSJ article.
DXJ is best-selling ETF this year with inflows of about $7.7 billion, while EWJ has reeled in $5.3 billion, according to IndexUniverse data.
WisdomTree Japan Hedged Equity Fund
CurrencyShares Japanese Yen Trust