Of course, the slumping euro benefits ETFs such as the WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) and the iShares MSCI EMU ETF (NYSEArca: EZU), which is not currency hedged.
The European Central Bank (ECB) has been an issue for investors this year, but the ECB recently noted it will not taper its quantitative easing program, at least not in the near-term. Market observers argued that the ECB could even extend its bond purchasing program to further support inflation. The ECB has already spent over a trillion euros buying government bonds, cut its benchmark rate to zero and adopted a negative deposit rate.
The Deutsche X-trackers MSCI EMU Hedged Equity ETF (NYSEArca: DBEZ), iShares Currency Hedged MSCI EMU ETF (NYSEArca: HEZU) and the aforemetioned HEDJ target Eurozone countries but try to diminish the negative effects of a depreciating EUR – a weakening foreign currency would normally reduce returns on overseas securities when converted back into a stronger U.S. dollar.
“As for European stocks, the upside breakout this month is stark. Using the Stoxx 600 pan-Europe index, it is easy to spot the move out from the trading range that held it in check for most of this year,” according to Barron’s.
For more information on hedged options, visit our currency hedged ETFs category.