16 Europe ETFs to Hedge Foreign Exchange Risks

With the U.S. dollar rebounding and European markets recovering, exchange traded fund investors may want to consider a currency-hedged strategy to capture the gains while mitigating the negative effects of an appreciating USD.

For example, the WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ), the largest Europe currency-hedged ETF, rose 7.6% over the past three months and recently broke above its long-term resistance at the 200-day simple moving average.

Related: Japan, Europe ETFs Climb Above Long-Term Trend

Investors would typically hedge their international investments if overseas currencies depreciate against the U.S. dollar – a weak foreign currency means that returns are lowered when converted back into USD terms. Consequently, through a currency hedged strategy, investors will be better able to capitalize on overseas market moves, without worrying about currency depreciation.

Overseas investments have gained popularity in recent years as global central banks enacted loose monetary policies to promote economic growth. However, the accommodative central bank measures would depreciate their respective currencies. Consequently, many investors have turned to currency-hedged ETFs to capture the growth and protect themselves against the foreign exchange risks.


Currently, investors are watching the Federal Reserve for cues. Fed chair Janet Yellen has said the ongoing improvements in the U.S. economy could warrant another interest rate hike “in the coming months,” reports Christopher Condon for Bloomberg.