Weaker Aussie Dollar Boosts Unhedged Tech Fund ASX:NDQ
The BetaShares US technology index fund (ASX:NDQ) is in an unusual position due to its unhedged exposure to the currency market. This means that when the Australian dollar weakens against the greenback, the unit price of the fund benefits, regardless of what happens to the underlying market.
The Australian dollar has been easing against the US dollar recently, which has worked in favor of unhedged offshore funds like ASX:NDQ. However, this is not a one-way street - if the local currency were to strengthen, it would erode this advantage just as quickly.
Market participants who prefer the underlying market return without the currency layer often look to hedged sibling products, which remove the effect at an additional cost and with some hedging friction. The current stretch is a textbook example of how global risk appetite deterioration can weaken the local dollar and cushion Australian portfolios.