The outcome was a surprise as the average forecast of analysts surveyed by Bloomberg at the end of last year was for Japan’s currency to weaken to 124 per dollar by the end of September. Instead, it was at 119.86 as of 9:10 a.m. in London on Tuesday.

BlackRock’s iShares Currency Hedged MSCI Japan ETF, for example, lost 16 percent in the past three months, exceeding the 13 percent loss of its unhedged counterpart.

More Choice

The products are designed so investors can move between hedged and unhedged funds, said Daniel Gamba, head of BlackRock’s iShares Americas institutional business.

With the Federal Reserve thus far refraining from raising interest rates, forecasters have been scaling back predictions for U.S. currency strength, and investors are reallocating capital.

Money has been moved from currency-hedged funds to similar products that preserve the foreign-exchange risk, said James Gardiner, a managing director at JA Forlines LLC, which manages about $425 million from Locust Valley, New York.

“We’ve been paring back our currency hedges and going basically currency neutral for the last quarter and a half,” he said. “With the most recent Fed decision and some of the economic data coming out, we’re pretty happy that we are 50/50 here because we’re not as confident that the dollar is going to resume its strength.”

Long Term

Net inflows this year remain the most on record, with funds focused on Japan and Europe exceeding the returns of their unhedged counterparts during the past nine months.

Appetite for these products depends on an investor’s time- frame, according to Susanne Alexandor, a Toronto-based senior member of the investment team at Cougar Global Investments Ltd., which has about 5 percent of the roughly $1.5 billion it manages in BlackRock’s hedged Japan fund. While the yen has gained since the end of July, it has slumped about 35 percent against the dollar during the past three years.