IHDG - Case For Currency Hedging: Weak Currency Benefits Europe And Japan

2024-06-11 07:20:00 ET

Summary

• Weak currencies can benefit Japanese and European companies with substantial overseas business operations, leading to limited incentives for the countries to significantly strengthen their currencies.
• The U.S. is more accepting of Japan and Europe maintaining weak currencies as a check on the rise of Chinese exports, benefiting its allies in their competition with China.
• Currency hedging, whether through dynamic or fully hedged strategies, has delivered risk reduction and return enhancements for many developed international portfolios.

By Liqian Ren

In today's complex global economy, currency fluctuations play a crucial role in shaping investment outcomes. While we've previously emphasized the importance of currency hedging in a U.S. investor's international portfolio , there's a subtle aspect that often goes unnoticed: the positive impact of weak currencies for Japanese and European companies and U.S. tolerance of it as a check on Chinese exports....

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