International investors have recently gotten a lot more interested in currency-hedged ETFs. But what are currency-hedged ETFs, and how can you decide whether they belong in your portfolio?(NYSEMKT:DXJ)
In the following video, Fool contributor Dan Caplinger discusses the ins and outs of currency-hedged ETFs. As Dan notes, the strong performance of the Japanese stock market amid weakness in the Japanese yen led to a big surge in interest in currency hedging strategy. Yet Dan also points out that the currency hedge can work both ways with these ETFs, hurting results when the U.S. dollar is weak. Dan concludes with some examples of situations in which trying to hedge currency risk really doesn't make any sense.