Political volatility returned to the Eurozone, sending the common currency and stocks there sliding Tuesday. Amid rising political risks in Italy and Spain, the Eurozone’s third- and fourth-largest economies, respectively, the euro hit a six-month low against the dollar yesterday.
With the U.S. dollar recently gaining strength against a basket of major developed market currencies, including the euro, investors may want to revisit currency hedged exchange traded funds, including the X-trackers MSCI EMU Hedged Equity ETF (NYSEArca: DBEZ).
“The euro was shoved lower after Italian President Sergio Mattarella blocked two antiestablishment parties from taking power by rejecting their euroskeptic candidate for economy minister,” reports MarketWatch.
DBEZ “seeks investment results that correspond generally to the performance, before fees and expenses, of the MSCI EMU IMI U.S. Dollar Hedged Index. DBEZ offers investors purer access to Eurozone equities while seeking to mitigate exposure to currency fluctuations between the U.S. dollar and the euro,” according to DWS.
Spanish and Italian stocks combine for about 16.7% of the fund’s geographic exposure.
Inside The Action
DBEZ holds more than 700 stocks and allocates about 60% of its combined weight to Germany and France, the two largest Eurozone economies. The Netherlands and Spain combine for almost 20%. The ETF allocates about 19% of its weight to financial services stocks and over 15% to industrial names. DBEZ is also levered to the recovering European consumer with a 13.7% weight to consumer discretionary stocks.