By doing a bit of research, it is seen that the cost of currency hedging is usually 200-300 basis points of the invested amount.
However, when comparing following ETF's:
iShares Core S&P 500 UCITS ETF USD (Acc)
iShares S&P 500 EUR Hedged UCITS ETF (Acc)
It is seen that the ETF hedging EUR only cost 0.20% per year as opposed to 0.07% for the unhedged version. That is only 13 basis points in difference, thus suggestion that currency hedging is much cheaper than the 200-300 basis points that one should "normally" expect to pay for a currency hedge.
So my question is: How can currency hedging for ETFs be so cheap?
I am looking forward to hearing from you.
Customer support service by UserEcho