Currency-hedged Europe exchange traded funds capitalized on the plunge in the euro and surge in equities Thursday after European Central Bank president Mario Draghi signaled that another round of stimulus measures may be implemented this year.
On Thursday, the iShares MSCI EMU ETF (NYSEArca: EZU) rose 1.5% and the SPDR EURO STOXX 50 (NYSEArca: FEZ) gained 1.8. The two ETFs both focus on Eurozone countries.
The CurrencyShares Euro Currency Trust (NYSEArca: FXE) dropped 1.8% Thursday, plummeting below its 50- and 200-day simple moving averages. [Central Banks Command Currency ETFs]
More aggressive currency traders may have also capitalized on the turn in the European euro through inverse ETF options. For instance, the ProShares Short Euro (NYSEArca: EUFX), which provides 100% of the inverse or opposite return of the U.S. dollar price of the euro, was up 1.7%, and the ProShares UltraShort Euro (NYSEArca: EUO), which provides 200% of the inverse return of the U.S. dollar price of the euro on a daily basis, was 3.6% higher. Additionally, the Market Vectors Double Short Euro ETN (NYSEArca: DRR), which tracks the Double Short Euro Index, which also provides a -200% exposure to the euro, advanced 3.5%. [Inverse Euro ETFs to Hedge Against ECB’s Willingness to Expand QE]
Meanwhile, euro-currency hedged ETFs that help diminish the negative effects of a stronger dollar or weaker euro currency jumped ahead of other Europe ETFs as the falling euro helped push the hedged version ahead. On Thursday, the Deutsche X-trackers MSCI EMU Hedged Equity ETF (NYSEArca: DBEZ) rose 1.9%, iShares Currency Hedged MSCI EMU ETF (NYSEArca: HEZU) increased 3.2% and WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) gained 3.8%.
The equity gains and EUR weakness followed comments from ECB head Mario Draghi that hinted at additional stimulus measures at the central bank’s December meeting, reports Paul Gordon for Bloomberg.
Potential measures to boost the economy include expanding its bond purchasing program to combat low inflation and further reduction in the deposit rate.
“The degree of monetary-policy accommodation will need to be reviewed at our December meeting when new macroeconomic projections will be available,” Draghi said. “We want to be vigilant, as people used to say in the old times.”
Potentially revealing the ECB’s intentions ahead of the December meeting, Draghi dropped the phrase “vigilant,” which his predecessor Jean-Claude Trichet used to warn of upcoming changes in policy.
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Max Chen contributed to this article.