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International Equities and the U.S. Dollar: Is It Time to Hedge?
By Advisor Perspectives
Wealth Management, Capital Markets
In a reversal from last year, the U.S. dollar has strengthened against other major currencies in 2018, reflecting rising U.S. rates, expectations of more Federal Reserve rate hikes and recent sluggish economic data outside the U.S. While U.S. dollar strength has broad implications for earnings and markets, it also has a direct impact on the performance of international equity allocations for U.S. investors. Most international equity strategies are unhedged, which generally benefits U.S. investors in periods of dollar weakness but creates a headwind for returns when the dollar is strengthening.
So the dollar’s recent reversal raises an important question: Should investors start to incorporate currency hedging into their international equity allocations?
Read more at Advisor Perspectives.
Photo: Véronique Debord-Lazaro