The CurrencyShares Euro Currency Trust (NYSEArca: FXE) is off another 0.2% Wednesday, bringing its July tumble to 2.2%, giving investors little reason to stand by the ETF.
FXE has bled almost $6.8 million in assets this month, bringing its year-to-date outflows north of $70 million.
“Year-to-date, the fund has lost a significant portion of assets, with more than $70 million leaving the fund via redemptions,” said Street One Financial Vice President Paul Weisbruch in a note out last week. “What is surprising to us is that this ETF is only the seventh largest currency ETP listed in the U.S. marketplace in general currently in terms of assets under management, behind products that track things such as the Swiss Franc, Canadian Dollar, and Australian Dollar for example.” [ETF Chart of the Day: Euro Bears]
With FXE trading near its lowest levels since November, investors are flocking to ETFs that benefit from euro weakness. For example, the PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP) has pulled in almost $13 million over the past month, according to PowerShares data. UUP is the equivalent of a U.S. Dollar Index tracking ETF.
The WisdomTree Bloomberg U.S. Dollar Bullish Fund (NYSEArca: USDU), which currently tracks the dollar against the euro, yen, Canadian dollar, British pound, Mexican peso, Australia dollar, franc, South Korean won, Chinese yuan and Brazilian real, has added $2.5 million this month on its way to a 1.6% gain. USDU’s bullishness is accelerating as the fund has jumped 1.3% in just the past week.
Although the euro is weakening, European equities are pulling back as well. However, some investors are betting that scenario will not persist.
Since the start of this month, $307.5 million has flowed into the WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) while investors have pulled almost $472 million from the Vanguard FTSE Europe ETF (NYSEArca: VGK), which is not a hedged product. The db X-Trackers MSCI Europe Hedged Equity Fund (NYSEArca: DBEU), which like HEDJ has previously displayed positive sensitivity to news of a weaker euro, has added $17.6 million this month.
DBEU tracks 16 developed European stock markets, including Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. [Beat Euro Risk With This ETF]
HEDJ is up 4.4% year-to-date, easily outperforming the largest Germany and France single-country ETFs along the way. The Eurozone’s two largest economies combine for almost 50% of HEDJ’s weight. The ETF has more than doubled in size April when WisdomTree announced the fund surpassed $1 billion in assets under management. [Hedged Euro ETF Tops $1B in AUM]
WisdomTree Europe Hedged Equity Fund
Tom Lydon’s clients own shares of HEDJ.