HEWJ - HEWJ: The Yen Hedge Is Still Paying Off

2024-05-31 06:34:25 ET

Summary

• The iShares Currency Hedged MSCI Japan ETF has successfully taken advantage of the rise in Japanese indices while avoiding the depreciation of the Yen.
• The ETF benefits from a weak Yen, particularly in the automotive and industrial sectors, but imported inflation and consumer sentiment are hurting domestic demand.
• The carry trade is the key activity that is weakening the Yen even further, and it will be difficult to get that trade to unwind. Sustainable Japanese inflation is needed.
• Also, the BoJ will have to be effective in using intervention to upset carry traders while they buy time for the shunto season wage increases to take effect.
• HEWJ still looks alright on general Japanese market optimism, but we would get out of the way when signs of Yen appreciating comes.

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