The past year’s steady decline in the US dollar relative to foreign currencies has translated into higher returns for non-US indexes based in US dollars, according to global index provider FTSE Russell.
To illustrate, the FTSE All-World® ex US Index had a 28% return for the 12-month period ended January 5, 2018 as based in US dollars as compared to a 19.5% return as based in local currencies for the countries in the index for the same time period. And the FTSE Emerging Index had a 35% return for the 12-month period ended January 5, 2018 in US dollars as compared to a 29% return as based in local currencies.
Alec Young, managing director, global markets research, FTSE Russell:
“Currency translation is an important component of the diversification potential of foreign stocks and the relative performance of international stocks as measured by non-US indexes for US investors. For example, a rising US dollar relative to non-US currencies will have a negative impact on US dollar-based non-US index returns. On the other hand, a falling US dollar relative to non-US currencies will have a positive impact on US dollar-based non-US index returns. Last year was a case in point as a weak US dollar led to significantly higher dollar denominated international equity index performance across both developed and emerging markets.”
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Data source: FTSE Russell, data as of January 8, 2018. Past performance is no guarantee of future results. All index returns cited are without currency hedging. Please see the disclaimer for important legal information.
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Views expressed by Alec Young are as of January 10 and subject to change. These views do not necessarily reflect the opinion of FTSE Russell or the LSE Group.
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