CHICAGO, Feb 8 (Reuters) – Owning a truly globalized
portfolio means investing in both developed and emerging
markets, but figuring out the right mix gets complicated when
you consider currency risk.
In just the past few weeks, a new Japanese stimulus policy
that has been easing the relative value of the yen is the latest
thing upsetting global trade.
More countries may soon get into the currency devaluation
game, too. The Bank of England, in trying to avert another
recession, may adopt U.S. Federal Reserve-style quantitative
easing policy moves to jump-start the British economy. The pound
has already fallen some 3 percent against the dollar in 2013 in
anticipation of that move, according to BMO Private Bank.
It is too early to tell how currency battles will play out
at a time when slow growth is forecast for most developed
countries. The United States is struggling to revive employment.
Japan is trying to climb out of a slump that has lasted more
than a decade. The euro zone, mired in austerity measures, still
faces high unemployment.
If you have investments in any of these countries, through
country-oriented or trade-specific funds, your returns will
depend on how your funds are denominated. If your portfolio is
concentrated in U.S. dollar-earning companies, it could lose
some value due to exchange rate shifts, while the yen- and
pound-denominated stocks could rise in value.