How currency impacts your portfolio

As an investor, you don't need to be able to make currency calls yourself, but you do need to understand their impact on your portfolio.

Shehryar Khan, CFA 25 September, 2017 | 11:00PM



Shehryar Khan: When it comes to traveling, Canadians are acutely aware of the impact currencies can play on the total cost of their trip. It's not so different when it comes to our portfolios. For those investors with unhedged exposure to foreign equities and bonds, changes in the value of the Canadian dollar can at times have an outsized impact on returns. Since reaching it's high in late 2010, the Canadian dollar has been on a steady decline against most major currencies which has been a strong tailwind for non-domestic holdings. If an investor was unhedged, there was nothing to complain about as the devaluation of the dollar added to the strong market returns we have seen in the past few years. However, since bottoming out at below 70 cents US in early 2016, the Canadian dollar has had a strong rally back, and the results weren't as pretty for unhedged investors.

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About Author

Shehryar Khan, CFA

Shehryar Khan, CFA  Shehryar Khan, CFA, is a senior investment analyst for Morningstar’s Investment Management group.

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