The currency markets have been unpredictable, with the U.S. dollar unexpectedly weakening this year, adding another layer of risk when ETF investors seek to gain exposure to potential overseas opportunities.
On the upcoming webcast (available live and on demand for CE Credit), Tired of Trying to Determine Which Way the Dollar is Headed?, Salvatore Bruno, Chief Investment Officer and Managing Director of IndexIQ, and Yan Yan, Associate Director of Research and Analytics at FTSE Russell, will outline risks international markets pose to equity investments and discuss hedging strategies to better manage exposure to global markets.
For instance, ETF investors may consider alternative options that take a more neutral view on foreign currency movements through a handful of 50% hedged/50% unhedged options, including the IQ 50 Percent Hedged FTSE International ETF (NYSEArca: HFXI), IQ 50 Percent Hedged FTSE Europe ETF (NYSEArca: HFXE) and IQ 50 Percent Hedged FTSE Japan ETF (NYS Arca: HFXJ). All three funds have approximately half their currency exposure of the securities in the underlying index hedged against the U.S. dollar on a monthly basis.
The forex market is volatile, and the U.S. dollar has been depreciating since the start of the year. Consequently, investors who have a more neutral stance on the foreign exchange outlook may consider a 50% hedged international investment as a way to limit volatility in their international exposure due to a sudden currency swing.