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Investors Piled Into These ETFs Ahead of ECB Meeting


The CurrencyShares Euro Currency Trust (FXE) fell 0.16% on volume that was more than 58% greater than the daily average on Wednesday in what can be seen as another sign that financial markets are expecting the European Central Bank to unveil some type of easing plan when it meets in Brussels today.

Down 2% in the past month, FXE closed at its lowest levels since February on Wednesday, but as the euro ETF flails as traders expect ECB easing, other ETFs are winning. Signs from those ETFs, which have been mounting for several weeks, continued during Wednesday’s U.S. session in what was the last day of action for those funds prior to the ECB meeting. http://www.etftrends.com/2014/06/gametime-for-ecb-europe-etfs/

Several funds have separated themselves from the Europe ETF pack as preferred destinations for ECB easing preparation as investors have sought out the funds most likely to benefit from a weaker euro.

On Wednesday, the WisdomTree Europe Hedged Equity Fund (HEDJ) continued bolstering its status as a premier ECB easing ETF. For several weeks, HEDJ has either made new all-time highs, seen significant volume increase or both on a near daily basis. Yesterday, it was volume as HEDJ closed modestly higher on seven times the average daily turnover. [Signs Point to ECB Easing]

On Tuesday and Wednesday combined, HEDJ traded $140 million. In a recent survey of financial advisors conducted by RIA Database and ETF Trends, 46% of respondents say they are interested in a Europe-hedged position but are still researching the market and 24% are overweight Europe. [Profit From Global Markets While Hedging Currency Risk]

HEDJ is up almost 4% in the past month. Although it was flat and lightly traded Wednesday, the db X-Trackers MSCI Europe Hedged Equity Fund (DBEU) has been another ETF in the ECB easing spotlight.

DBEU makes sense for a conservative investor that wants some Eurozone exposure without giving up exposure to the U.K. and Switzerland. Those countries combine for about 42% of DBEU’s weight, according to issuer data. The ETF also allocates some of its weight Nordic countries. Although it is not a pure euro hedged play, DBEU has gotten an ECB anticipation in the form of massive inflows as $128 million of the ETF’s $163.5 million in assets have come into the fund since the start of May.

Over that same period, the iShares MSCI EMU ETF (EZU) and the SPDR EURO STOXX 50 (FEZ) have taken in over $1 billion. Neither EZU nor FEZ are currency hedged ETFs, but each offers Eurozone purity in terms of country allocations.

France and Germany represent sizable chunks of both ETFs an average of 64.5%, but neither features any exposure to the U.K. or Switzerland. About $400 million changed hands in EZU Wednesday on triple the average turnover. [Great Diversified Europe ETFs]

WisdomTree Europe Hedged Equity Fund


Tom Lydon’s clients own shares of HEDJ.