Investing term

What is Currency hedging?

An overlay used by some international ETFs to remove the effect of currency moves, so you get the foreign stock return in your home currency.

Currency hedging is an overlay some international funds use to strip out the effect of exchange-rate moves, so you earn the foreign stock's return in your home currency without the currency noise. It removes a source of volatility but adds a small cost, and over very long horizons currency swings tend to wash out — so hedging matters most over shorter periods.

For example

A hedged Japan fund gives you the Japanese stocks' return even if the yen falls against your currency — the currency move is neutralized.

Currency hedging is taught hands-on in Stage 19 — Beyond Stocks.

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