Not Much Love for Currency ETFs

Not Much Love for Currency ETFs

CFRA’s Ullal says the lack of attention to currency-related funds is surprising.

Reviewed by: Heather Bell
Edited by: Heather Bell

Currency-related exchange-traded funds aren’t seeing the flows one might expect, given that they are performing well when most investment categories are tanking, CFRA Research’s Aniket Ullal told  

Ullal joined’s Exchange Traded Fridays podcast last week, noting that the weak fund flows weren’t expected at the start of the year, when the focus was on the implications of Russia’s invasion of Ukraine. 

“I would say the most immediate thing to look at is currency-pair ETFs, which are certainly very interesting and probably haven't got the attention they should,” said Ullal, who is CFRA’s head of ETF data and analytics.  

“I think this is a very important story for investors right now. While currency ETFs pairing the dollar with a single foreign currency have outperformed equity markets, the inflows into such funds are muted.”  

For example, the Invesco CurrencyShares Swiss Franc Trust (FXF) is down less than 8% at a time when equities are down more than 20%. It had outflows of nearly $26 million this year. 

And the $2.1 billion Invesco DB U.S. Dollar Index Bullish Fund (UUP), which measures the performance of the U.S. dollar relative to a basket of key non-U.S. currencies, has gained 18% so far this year. That gain comes amid a backdrop of tumbling stock and bond markets: The S&P 500 has dropped 23% in 2022. The ETF’s inflows of more than $1 billion are far less than the nearly $10 billion the WisdomTree Japan Hedged Equity Fund (DXJ) saw in in 2013. 

Currency-Hedged ETFs 

With currency-hedged ETFs, which eliminate the impact of foreign currency fluctuations relative to the U.S. dollar, the same issue arises. Multiple currency-hedged ETFs have displayed significant outperformance relative to their unhedged counterparts, but they have seen minimal inflows.  

“What surprised me this time around is that currency-hedged ETFs actually haven't taken in as much money as one would expect,” Ullal said, recalling the popularity of currency-hedged Japan ETFs nearly a decade ago.  

The yen in 2013 had its biggest drop in more than 30 years against the dollar. Year to date, DXJ is slightly positive in terms of performance, while its unhedged counterpart is down more than 25%. Yet the fund has seen minor outflows. The iShares Currency Hedged MSCI Japan ETF (HEWJ) is down a little more than 5%, still significantly outperforming EWJ, and it has lost more than $280 million this year. 

Ullal cited the strong performance in 2022 of currency-hedged ETFs relative to their unhedged counterparts at a time when the dollar is strengthening relative to other markets.  

“We're talking 6%, 7% differences here, between hedged and unhedged versions, which is very significant for investors. Despite that, we've actually seen negative to marginal inflows into the hedged versions,” he pointed out. “I think it's possible that the bigger narratives in the market have investors more focused on those—inflation and rates and so on.” 


Contact Heather Bell at [email protected] 

Heather Bell is a former managing editor of She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.