To welcome the New Year, WisdomTree launched the WisdomTree International Hedged Equity ETF (HEDJ: Quote, Profile, Advanced Chart, News) on December 31. The fund will be the first ETF to hedge its own positions against changes in international exchange rates.

Investors have long been plagued with the ties to currency movements, as international stocks usually rise or fall inversely to the change in the US dollar. However, the new WisdomTree fund seeks to perform equally to a broad portfolio of companies in developed markets outside the US with no exposure to changes in the currency market.

According to the SEC filing, the fund will exist as a fund of funds, investing in WisdomTree Europe Total Dividend Fund (DEB: Quote, Profile, Advanced Chart, News), Japan Total Dividend Fund (DXJ: Quote, Profile, Advanced Chart, News) and Pacific ex-Japan Total Dividend Fund (DND: Quote, Profile, Advanced Chart, News), while purchasing currency futures positions to negate any fluctuation risk.

Given the complexity of weighting an international stock fund to avoid currency fluctuation, the fund sells for an inexpensive .58% annual expense.

The vitality of currency ETFs was long questioned, as only a few were operating with enough assets to cover expenses. However, investors recently have picked up the pace, investing nearly as much in October as the first nine months of 2009 combined.

$548 million was added to currency ETFs in October, pushing the year to date total to $1.2 billion, according to The Street. The incredible gain in invested assets suggests that currencies may soon be a mainstay in the average portfolio, helping to erase currency fluctuations that threaten portfolios that are limited in their geographic diversification.

A shift in investor sentiment towards cash as an asset class, rather than a basic unit, has led investors to seek out foreign diversification against currency risk. Rydex CurrencyShares Australian Dollar Trust (FXA: Quote, Profile, Advanced Chart, News), Rydex CurrencyShares Japanese Yen Trust (FXY: Quote, Profile, Advanced Chart, News), Rydex CurrencyShares Euro Trust (FXE: Quote, Profile, Advanced Chart, News), and Rydex CurrencyShares Canadian Dollar Trust (FXC: Quote, Profile, Advanced Chart, News) provide investors a liquid hedge against foreign currency fluctuations, while the PowerShares US Dollar Index Bearish Fund (UDN: Quote, Profile, Advanced Chart, News) and PowerShares DB US Dollar Index Bullish Fund (UUP: Quote, Profile, Advanced Chart, News) allow opportunities to buy and sell the dollar.

In a bid to bring foreign stocks closer to the United States through ETFs, iShares has filed with the SEC to create two new funds dedicated to overseas financial companies. The new funds will be the first of their kind, but will hope to follow in the footsteps of popular US-based financial ETFs trading on the NYSE.

The iShares MSCI Europe Financial Sector Index Fund will track a composition of stocks very much like its underlying index, which is comprised of 105 companies in 15 different European countries, according to the prospectus. The fund makes no distinctions by the size of the financial institution, indicating that iShares is hoping to create a broad based index ETF, rather than pinpoint a niche within the European markets.

The iShares MSCI Far East Financial Sector Index Fund will work differently than its partner fund, opting to utilize a sampling of stocks to derive similar performance results as its underlying index, according to the prospectus. The underlying index contains 93 different banks, insurance and real estate companies in three different Asian countries, including Hong Kong, Japan and Singapore.

Reaching into an untapped market in China, Claymore has launched the Claymore/AlphaShares China All-Cap ETF fund (YAO: Quote, Profile, Advanced Chart, News) to offer U.S. investors a gateway into Chinese stocks. The fund will be one of the broadest Chinese ETFs trading in the U.S., featuring a selection of 99 stocks.

The Claymore/AlphaShares China All-Cap ETF combines the large cap holdings of its competitors, such as the popular iShares FTSE/Xinhua China 25 ETF (FXI: Quote, Profile, Advanced Chart, News), with a variety of small cap stocks to add to its growth. Dr. Burton G. Malkiel, CIO of AlphaShares, also noted, “China is the leading driver of global GDP growth today and will soon pass Japan to become the second largest economy in the world. However, most investors have less than 2% of their portfolio invested in China,” in a press release for the new ETF.

The fund comes with a moderate .70% annual expense, slightly lower than its largest competitor, the iShares FTSE/Xinhua China 25 ETF, which charges .74%.

As Japan exits the monetary policy debacle of the “Lost Decade,” the Democratic Party of Japan won a landslide election, signaling a new chapter for the history books. Many investors believe this event could be a deciding moment for the Japanese economy.

The Democratic Party of Japan intends to shift the nation from an infrastructure-led economy to one that is consumer-led, transforming infrastructure spending into a credit of $3000 per year per child for families with children. The newly elected officers hope the stimulus can help ease the costs of an aging society. The country, which has been on the verge of recession for 20 years, has experienced a lackluster stock market, which is still off 30% from 1990 levels, according to MoneyMorning.

The iShares MSCI Japan Index (EWJ: Quote, Profile, Advanced Chart, News) provides an excellent way to obtain exposure to Japanese stocks, which many expect should rally amidst such a great shift in political policy.