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A euro currency-hedged European stock exchange traded fund could begin to outperform if the European Central Bank makes good on hints at cutting interest rates even more.

ECB President Mario Draghi stated that policy makers will reduce interest rates further if needed after rates hit a record low 0.5% last week, Bloomberg reports.

"We will be looking at all the data that arrives from the euro-area economy in the coming weeks and if necessary, we are ready to act again," Draghi said in a speech. "Monetary policy will remain accommodative."

Moreover, the central bank will even contemplate taking the deposit rate into negative territory to stoke the economy.

"The Governing Council has decided for the first time to look openly at the possibility of reducing the interest rate on the deposit facility to less than zero," Draghi added. "There are many complications. There are many consequences that we must take into account and study closely. The Governing Council has decided to analyze these consequences in order to be ready to act if needed."

Any further accomodative measures would help boost European equities. However, ETFs that track eurozone stocks, like the Vanguard FTSE Europe ETF (NYSEARCA:VGK), are subject to currency risks - a depreciating euro currency would negatively impact the fund's performance.

Instead, investors can take a look at the WisdomTree Europe Hedged Equity Fund (NYSEARCA:HEDJ), which is designed to have a higher return than an equivalent non-currency hedged investment when the value of the U.S. dollar is appreciating against the euro.

The WisdomTree ETF has a 23.3% allocation in consumer staples, 19.6% in consumer discretionary, 15.7% in industrials, 13.6% in health care 9.7% in materials, 8.0% in financials, 6.1% in info technology, 2.2% in telecom services and 1.8% in energy.

HEDJ's underlying holdings would benefit from a weaker euro. Specifically, exporters would get a boost as it becomes cheaper to sell abroad. Top holdings include Bayer AG 5.2%, Unilver 5.1%, Anheuser Busch InBev 4.9%, Sanofi-Aventis 4.8% and Daimler AG 4.7%.

HEDJ has gained 8.0% year-to-date, compared to VGK's 7.0% rise.

Another similar WisdomTree ETF, the WisdomTree Japan Hedged Equity (NYSEARCA:DXJ), has also been beating non-currency hedged funds as the Bank of Japan enacted aggressive new monetary policies.

WisdomTree Europe Hedged Equity Fund

(click to enlarge)

Max Chen contributed to this article.

Source: A Europe ETF To Play The ECB's Loose Monetary Policies