Currency swings can have a big impact on ETF performance - especially for Canadians who are invested in the U.S. stock market. This week, the loonie took a hit, after Bank of Canada Governor Stephen Poloz left the door open for an interest rate cut. And yet, south of the border, U.S. President Donald Trump has openly addressed his interest in seeing a weaker U.S. dollar (something his pick for Treasury Secretary may not agree with).
On the TSX, there are a variety of ETFs built for those who want to own U.S. stocks and also factor in the potential moves in the Canadian dollar, versus the U.S. dollar:
Vanguard S&P 500 ETF
This ETF tracks the S&P 500, but is not hedged. So if you think the loonie will strengthen vs the US dollar, this would be the way go.
iShares Core S&P 500 ETF (CAD-Hedged)
BMO S&P 500 hedged to CAD Index ETF
Each of these tracks the S&P 500, but they are hedged to the Canadian dollar. So if you think the US dollar will get stronger vs the loonie, this gives you some protection. Worth noting: hedging isn’t free. So those ETFS generally carry higher expense ratios than ETFS that have no hedging.