In a hedged equity investment like DXJ, one garners the benefits of Japan’s heightened capacity to export without losing money alongside a depreciating currency. In an unhedged equity investment like iShares MSCI United Kingdom (EWU), however, one might find he/she is underperforming when the underlying currency (i.e. British Pound) is at a year-to-date peak. Notice in the chart below that the current price of CurrencyShares British Pound (FXB) is back at 2013 highs and that its 50-day moving average crossed above its 200-day moving average in mid-September. Since the cross-over, SPDR Trust S&P 500 (SPY) has gained 5.9% whereas EWU has only tacked on 2.5%.
