The U.S. dollar is at its highest level since 2000. According to the IMF, since the start of this year, the dollar has appreciated 22% against the yen, 13% against the euro, and 6% against emerging market currencies. This huge spike in the dollar’s value obviously has major implications for international investors, considering how the omnipresent dollar is in international trade and finance, and as a result, some investors are seeking out currency-hedged ETFs.
Amid a strong dollar, global inflation, choppy markets, and several central banks raising interest rates to curb rising prices, international market exposures could face some unintended foreign exchange currency risks. So, to mitigate these risks and offer a purer play on the underlying foreign markets, global equity investors with such exposures may want to consider some currency-hedged investment strategies.
Some available currency-hedged ETFs include the Xtrackers MSCI All World ex U.S. Hedged Equity ETF (DBAW), the Xtrackers MSCI EAFE Hedged Equity ETF (DBEF), and the Xtrackers MSCI Emerging Markets Hedged Equity ETF (DBEM).
DBAW seeks investment results that correspond generally to the performance, before fees and expenses, of the MSCI ACWI ex USA U.S. Dollar Hedged Index. The Index is designed to provide exposure to equity securities in developed and emerging stock markets (excluding the U.S.), while at the same time mitigating exposure to
fluctuations between the value of the U.S. dollar and selected non-U.S. currencies.
DBEF, meanwhile, seeks investment results that generally correspond to the performance of the MSCI EAFE US Dollar Hedged Index, which is designed to track developed market performance while mitigating exposure to fluctuations between the value of the U.S. dollar and the currencies of the developed economies included in Europe, Australasia, and the Far East.
For investors seeking the same currency hedging strategy with emerging markets, there’s DBEM. This fund seeks investment results that correspond generally to the performance of the MSCI EM US Dollar Hedged Index. Using an indexing investment approach, the fund seeks investment results that correspond generally to the performance, before fees and expenses, of the underlying index, which is designed to track emerging market performance while mitigating exposure to fluctuations between the value of the U.S. dollar and the currencies of the countries included in the underlying index.
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