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Currency fluctuations might have little effect, but currency hedging causes significant drag.
In the case of XSP, which one could argue should be really easy to hedge (single currency and a major index) the performance loss has been tremendous.

The S&P 500, if you look at SPY, returned 8.79% CAGR over 15 years. We would expect the hedged XSP to return about the same (in CAD), maybe a little bit less due to the higher MER.

But XSP returned 7.03% CAGR. There was a performance loss of 1.76% per year! This is huge... much more than just 0.2% as you might expect due to MER and foreign tax effect.

(Digging into this a bit more, you'll see that the drag due to hedging becomes worse in higher volatility situations.)

In fact, the original founder of this forum was one of the first people to analyze and write about this. How can currency hedging be worth such an enormous cost -- a whopping 1% to 2% annual performance?
 

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FWIW, I am also in the no hedging camp. I own VTI and VEA in $US, un-hedged and VUN and ZEA in $CAN, also un-hedged. In view hedging (1) doesn't work all that well, (2) costs extra, creating an unnecessary drag on performance, and (3) works against the hedging that I am looking for, which is to actively gain exposure to the US and overseas economy, including their currency performance.
 
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