To hedge or not to hedge? How to think about your currency exposure

Three ways to think about currency exposure

In the latest insight into the intricacies of ETF trading, David Abner, head of Europe at WisdomTree, discusses currency hedging.

When you invest in stocks in foreign countries, understanding the ramifications of differing currencies on investment returns becomes a critical piece of knowledge. Currency-hedged ETFs are therefore a powerful tool for investors because they allow them to invest easily in international markets and only take on the exposure of the underlying equity. Before currency-hedged ETFs existed, investors would have to short another ETF, a future, or the spot currency itself to hedge out the currency exposure in their underlying equity position. Sterling falls after hung parliament confirmed...