The Bank of Japan and Reserve Bank of Australia also currently have easing biases. Japan and Australia combine for nearly 22% of IHDG’s weight.
While BoJ, the ECB and RBA have easing biases, the Federal Reserve has telegraphed its tightening bias by tapering quantitative easing. That could open the door to a significant rally for the greenback, boosting the allure of the Australian, European and Japanese exporters found among IHDG’s nearly 200 holdings.
“If the U.S. Federal Reserve increases interest rates before the European Central Bank (ECB) or the Bank of Japan (BOJ), there could potentially be a time in the next two years when U.S. investors are paid the relative interest rate differentials to hedge foreign currencies,” said WisdomTree Research Director Jeremy Schwartz in a note.
IHDG Top-10 Holdings
Table Courtesy: WisdomTree