Currency Risk when Buying a Foreign ETF

[Cyrix]

I am in the US and my base currency is the USD. I want to buy 100K Euro of an ETF (IHYG) which is denominated in EUR and listed on the London Stock Exchange.
The way my broker (Interactive Brokers) performs the transaction is that it will automatically create a margin loan in EUR for me to buy this ETF. (https://ibkr.info/node/722)

My question is: am I subject to currency risks when I invest in this ETF, and how can I hedge them?
My goal is to capture only the price growth of the fund but not the currency movements.

Initially I was planning to short 100K EUR/USD to hedge the FX risk, but the more I thought about it, the more confusing it got.
Now I start to think there is only currency risk on the gain of the ETF, because IB lends me the 100K in Euro when I buy the ETF. When I sell the ETF, the funds will be returned in Euro, i.e. only currency risk on the gains.

Is that correct? If so, how can calculate the size of the hedge when I place the trade? How much EUR/USD should I go short to hedge this 100K EUR position?

Thanks.

 

[sss12]

I am in the US and my base currency is the USD. I want to buy 100K Euro of an ETF (IHYG) which is denominated in EUR and listed on the London Stock Exchange.
The way my broker (Interactive Brokers) performs the transaction is that it will automatically create a margin loan in EUR for me to buy this ETF. (https://ibkr.info/node/722)

My question is: am I subject to currency risks when I invest in this ETF, and how can I hedge them?
My goal is to capture only the price growth of the fund but not the currency movements.

Initially I was planning to short 100K EUR/USD to hedge the FX risk, but the more I thought about it, the more confusing it got.
Now I start to think there is only currency risk on the gain of the ETF, because IB lends me the 100K in Euro when I buy the ETF. When I sell the ETF, the funds will be returned in Euro, i.e. only currency risk on the gains.

Is that correct? If so, how can calculate the size of the hedge when I place the trade? How much EUR/USD should I go short to hedge this 100K EUR position?

Thanks.

To simplify things you can by a similar ETF that is traded/listed in the US such as IHY, HYXV, IJNK. These are not 100 % European HY..... AND, these still have currency risk ie: They are long in the local currency.

On the equity side you can buy ETF's that are already currency hedged ie: DBEU(hedged) vs VGK. so an easy solution on the equity side is to split the investment between the 2 essentially taking the FX out of it.

I don't know if a USD hedged alternative exists on the HY international fount.

 

[helpme_please]

I am in the US and my base currency is the USD. I want to buy 100K Euro of an ETF (IHYG) which is denominated in EUR and listed on the London Stock Exchange.
The way my broker (Interactive Brokers) performs the transaction is that it will automatically create a margin loan in EUR for me to buy this ETF. (https://ibkr.info/node/722)

My question is: am I subject to currency risks when I invest in this ETF, and how can I hedge them?
My goal is to capture only the price growth of the fund but not the currency movements.

Initially I was planning to short 100K EUR/USD to hedge the FX risk, but the more I thought about it, the more confusing it got.
Now I start to think there is only currency risk on the gain of the ETF, because IB lends me the 100K in Euro when I buy the ETF. When I sell the ETF, the funds will be returned in Euro, i.e. only currency risk on the gains.

Is that correct? If so, how can calculate the size of the hedge when I place the trade? How much EUR/USD should I go short to hedge this 100K EUR position?

Thanks.

You can buy IHYU. It is the equivalent of IHYG but denominated in USD. This should solve your currency concerns.

 

[Cyrix]

You can buy IHYU. It is the equivalent of IHYG but denominated in USD. This should solve your currency concerns.

Thank you and sss12 for your info, but for this position I want to invest in the European high yield index, while the tickers recommended above, such as IHYU, are tracking other markets.

In my original question, IHYG is just an example. I am planning to buy many EUR and CAD denominated funds, so I do need to figure out the calculations for the size for FX hedging.

Can anyone provide some guidance on that? Thanks.