Dollar Strength Reveals Merits of Currency Hedged ETFs | Page 2 of 2 | ETF Trends

However, Bush warned of potential currency risks ahead. For example, Bush said Deutsche projects the euro currency to weaken to $1.15 – the euro is currently hovering around $1.19.

As ETF investors seek international exposure to diversify their equity portfolio and potentially tap into more attractive plays abroad, traders should consider currency-hedged strategies that allow investors to capture upside potential in the global markets while hedging against potentially weakening international currencies or a stronger U.S. dollar.

For instance, the depreciating JPY has allowed currency-hedged Japan ETFs to outperform their non-hedged peers. For instance, the WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ), iShares Currency Hedged MSCI Japan ETF (NYSEArca: HEWJ) and Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSEArca: DBJP) have been go-to options to access Japanese equities markets while hedging against foreign exchange risks. As the dollar strengthened against the yen currency over the past month, DXJ gained 3.6%, HEWJ rose 4.0% and increased 4.0% while the non-hedged benchmark MSCI Japan Index was 1.3% higher.

Meanwhile, investors who believed the euro currency could weaken after its recent rally and are bullish on the broader Eurozone turned to the Deutsche X-trackers MSCI EMU Hedged Equity ETF (NYSEArca: DBEZ), iShares Currency Hedged MSCI EMU ETF (NYSEArca: HEZU) and WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ). In the past month as the USD appreciated against the EUR, DBEZ jumped 6.0%, HEZU surged 5.4% and advanced 4.7% while the non-hedged benchmark MSCI EMU Index added 2.0%.

For more information on currency-hedged strategies, visit our currency hedged ETFs category.