More to Come for Yen Hedged ETFs

The hedged currency exchange traded fund movement continues to gain steam, but investors may not want to get too frustrated with the currency that initially put the spotlight on these ETFs: The yen.

After touching a four-and-a-half year low at 103.73 in late May, the yen has gained over 5% against the U.S. dollar. Doubts regarding the efficacy of Abenomics conspired with a variety of macro factors, including the recent U.S. government shutdown, to send currency traders rushing to the yen as a safe-haven alternative to the dollar.

Still, since May 31, the WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ), 2013 top asset-gathering ETF, is up nearly 5%. The db X-trackers MSCI Japan Hedged Equity Fund (NYSEArca: DBJP) is up 8.1% over the same time. [Yen Hedged ETFs Rally as Nikkei Soars]

So successful have DXJ and DBJP been that the rising yen did not deter the debut of DXJ’s small-cap cousin, the WisdomTree Japan Hedged SmallCap Equity Fund (NasdaqGS: DXJS). DXJS debuted in late June and is already up 8.1% with over $17 million in assets under management.

A combination of all three funds merits attention going forward. Macquarie expects USD/JPY at 105 over the next six months while Goldman Sachs sees USD/JPY at 103 in six months and 125 in 2016, according to CNBC.

There are also some expectations that the Bank of Japan, which is already purchasing $70 billion worth of Japanese government bonds per month, could up that figure early next year, further depressing the yen in the process. [Japan ETF’s Chart Shows Promise]