In many ways, Canada is a pioneer in the ETF space. It had the world’s first ETF, TIPS. And it was amongst the first to have currency-hedged ETFs.

As the ETF market gets more complex in the U.S., currency-hedged ETFs have attracted some notice—some would say too little.

Canadians have long been used to hedging debates – but there has been no clear conclusion, for a number of reasons.

One of them is the cost factor: many Canadian investors argue that currencies are ultimately a wash, even though they might provide a short-term trading opportunity. The cheapest solution is to buy ETFs listed in the U.S. That avoids forward contract costs tacked on to a Canadian hedged ETF as well as the MER drag of a Canadian ETF investing in a U.S.-listed ETF. Still, seeking the lowest fees entails at least one additional cost: currency conversion. There are ways to minimize it, such as Norbert’s Gambit.

But there is another cost. From 1972 to the present, the loonie has fluctuated from a high of $1.10 to a low of $0.62. From 1975 to 2002, Canadians would have benefited from a falling loonie. From 2002 to 2007, they would have lost money. Lately, it’s been a wash.

So for the long-term investor, the real question is how long is the long term?

For EAFE funds, it probably doesn’t much matter: currencies may well wash. Different countries have different economic and credit cycles. But the U.S. has what Charles de Gaulle once called “the exorbitant privilege” of printing the world’s reserve currency.

In a flight-to-safety scenario—all too frequent, these days—investors buy U.S. assets, pushing the dollar up. Canadians, well aware of that, have perhaps an instinctive respect for the greenback. But Americans may not. Strength in a time of crisis reduces their returns on assets whose only fault is that they are denominated in euros or yen.

Perhaps currency shouldn’t wag the dog.

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