Part of DBAP’s allure comes from its 23.6% weight to Australian equities. Even with the Australian dollar’s status as one of the most traded currencies in the world, ETF issuers have not gotten around to introducing a hedge Aussie dollar product in the U.S. Without such an ETF available, DBAP is one of the best equity-based avenues for profiting from the decline of the Aussie.
And declining is just what the Australian dollar is doing. Over the past three months, the CurrencyShares Australian Dollar Trust (NYSEArca: FXA) is off nearly 6%. Although it appears unlikely the Reserve Bank of Australia will lower interest rates again (Australia’s benchmark rate is a record low 2.5%), RBA has not been shy about saying it continues to view the Aussie as too expensive. [Upside for Australia ETFs]
With South Korean stocks accounting for 13.7% of DBAP’s weight, the ETF has benefited from recent weakness in that country’s won. The South Korean currency currently labors around five-month and to due to its intense export battle with Japan, South Korea’s efforts to weaken the won, though speculative at this point, cannot be deemed out of the realm of possibility, either.
Deutsche X-Trackers MSCI Asia Pacific ex Japan Hedged Equity ETF Country Lineup
Chart Courtesy: Deutsche Asset & Wealth Management