As the dollar keeps getting stronger, investors wanting to diversify into international equities are finding a refuge in hedged equity exchange traded funds (ETFs), which offer exposure to foreign stocks while hedging exposure to currency fluctuations between the dollar and the local currencies. Two of the largest hedged equity funds are Wisdom Tree Japan Hedged Equity Fund (NYSEMKT: DXJ) and Wisdom Tree Europe Hedged Equity Fund (NYSEMKT: HEDJ).

The European ETF’s net asset value (NAV) has risen from $55.782 on January 2 to $61.7836 on February 14, an asset total of $10.46 billion. The Japanese ETF’s NAV has increased from $49.7266 to $51.1833, for a total of $13.17 billion.

Lower-priced goods from both eurozone and Japanese firms would normally make equities denominated in euros and yen a reasonable diversification option, but as both the euro and the yen continue to fall against the dollar, the total return to investors can take a hit when earnings are repatriated to dollars.

The sharp increase in the European hedged equity fund is likely due to the uncertainty concerning Greece and how that country will resolve its debt issues with the rest of the eurozone. Given the threat that Greece may leave (or be kicked out of) the eurozone and that no one knows what impact that could have on the euro itself — other than the euro is sure to fall — investors wanting to maintain exposure to Europe have poured into the fund.

The euro has added a few ticks Tuesday morning, now trading at about 1.138 to the dollar. The yen is weakening, though, at around 119.1 to the dollar.

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