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Currency movement

Currency movement – Often, in reports, companies and investment managers will give the reason for performance to to be the strengthening or weakening of one currency against another.

Currency movements (unless hedged) can have a significant impact on the performance of a portfolio.

Taken from the point of view of a UK based investor who holds sterling-denominated shares in an investment company with US dollar investments:

  •  if the US dollar strengthens (rises) against the UK pound, the investor will see a rise in the value of the US holding
  •  if the UK pound weakens (falls) against the US dollar, the investor will see a rise in the value of the US holding

Therefore:

  •  if the US dollar weakens (falls) against the UK pound, the investor will see a fall in the value of the US holding
  •  if the UK pound strengthens (rises) against the US dollar, the investor will see a fall in the value of the US holding

 

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