Author Topic: Currency Fluctuations and VEA/VEU/VWO  (Read 2026 times)

SpiritualGangsta

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Currency Fluctuations and VEA/VEU/VWO
« on: September 23, 2015, 12:43:49 PM »
I am going to do more research on this subject... however I am currently bogged down by a few projects at work.

My question is, if the US dollar declines, would it positively affect VEA/VEU/VWO?

All these ETF's hold foreign stocks.. however from a brief look.. I believe they are holding them in US dollars. I am trying to hedge my portfolio against a possible dollar decline. I am holding a lot of cash, earning almost no yield and am looking into a way to diversify using ETF's like the aforementioned...

 

oriolesmagic

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Re: Currency Fluctuations and VEA/VEU/VWO
« Reply #1 on: September 24, 2015, 10:52:00 AM »
I am going to do more research on this subject... however I am currently bogged down by a few projects at work.

My question is, if the US dollar declines, would it positively affect VEA/VEU/VWO?
Yes.

All these ETF's hold foreign stocks.. however from a brief look.. I believe they are holding them in US dollars. I am trying to hedge my portfolio against a possible dollar decline.
No, they are held in local currencies. Consider the YTD returns for these two EAFE funds. The first is held in local currencies (similar to VEA). The second is hedged.

https://www.ishares.com/us/products/239623/ishares-msci-eafe-etf
https://www.ishares.com/us/products/259622/ishares-currency-hedged-msci-eafe-etf

YTD, the dollar has strengthened, providing a tailwind for the hedged version.


Note that Vanguard's International Bond Fund (BNDX) is currency hedged, so it does not expose your portfolio to currency risk. I believe that's why it has performed so well since inception despite its low yields.

 

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