Currency-hedged Eurozone exchange traded funds bounced Wednesday as the euro weakened and European markets strengthened on speculation the European Central Bank is considering additional bond purchases and fining banks to deter cash hoarding.
On Wednesday, the iShares MSCI EMU ETF (NYSEArca: EZU) rose 1.0% and the SPDR EURO STOXX 50 (NYSEArca: FEZ) was 0.9% higher. The two non-hedged ETFs both focus on Eurozone countries.
Meanwhile, the CurrencyShares Euro Currency Trust (NYSEArca: FXE) dipped 0.2% Wednesday as the euro fell 0.2% to $1.0626.
Euro-currency hedged ETFs, which diminish the negative effects of a stronger dollar or weaker euro currency, outpaced other Europe ETFs as the falling euro helped push the hedged version slightly ahead. On Friday, the Deutsche X-trackers MSCI EMU Hedged Equity ETF (NYSEArca: DBEZ) was up 1.0%, iShares Currency Hedged MSCI EMU ETF (NYSEArca: HEZU) rose 1.2% and WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) gained 1.0%. The hedged Europe ETFs are testing their long-term, 200-day simple moving average.
European stocks edged higher Wednesday on speculation the ECB would expand its easing policies to counter a slowing economy. Potential measures include buying bonds from towns and regions, along with introducing a two-tier penalty charge on banks that stow cash with the ECB, Reuters reports. [Concern Mounting over Eurozone ETFs]
“They are still trying to figure out what will be in the package. A lot of people have different views,” one insider official, who spoke on condition of anonymity, told Reuters. “There are some who say you should surprise markets. But you cannot surprise indefinitely. Sooner or later, you are bound to disappoint.”
Officials are concerned over the stagnating Eurozone economy and persistent deflationary environment. However, differing views within central bank have made it difficult to come up with a unified plan on enhancing easing or the low interest rates.