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Ae currency swings x
Ae currency swings x

FX Fluctuations: How it can affect your investment portfolio

Even if you don’t invest directly in the FX market, global currency movements can affect your investment portfolio. Find out how to minimise your risk

FX

FX Fluctuations: How it can affect your investment portfolio

The ups and downs of global currency movements can affect how your investment portfolio performs, even if you do not directly invest in the FX market.

The forex market is a large and volatile investment platform, with trading volumes of over US$5 trillion a day. Given its highly unpredictable nature, it is most suitable for corporate and institutional investors who have the appetite for a high level of risk.

However, even individual retail investors who may not be directly exposed to the currency market may be vulnerable to foreign currency risk through their investment portfolio

Impact of FX movement on your portfolio

As an investor looking to build and enhance your wealth, you have multiple investment avenues to choose from, be it direct equity, mutual funds, exchange traded funds, bonds, structured products etc  You can  purchase your investments in various currencies  for the purposes of gaining international exposure and diversification.

However, in the case of investment products that are valued in a currency other than USD, the income received from them, such as sales proceeds, interests and dividends may be prone to risks associated with currency movement.

Key to minimising FX risk on your portfolio

Since currency fluctuations can play a significant role in influencing the performance of your portfolio, keep the following pointers in mind when deciding on a foreign currency-based investment.

Need for a long-term view

There is no doubt that currency movements are extremely uncertain, especially in the short-term. However, investing in foreign denominated assets can still be beneficial as it can offer a certain degree of diversification. For instance, investments spread across foreign currency assets can potentially help you offset a loss in one market with gains in another.

Also, in the long run, currency movements are likely to even out due to economic cycles.

For more information on our Wealth Management Solutions, get in touch with us.

Disclaimer

This article is brought to you by Standard Chartered Bank (UAE) Limited. All information provided is for informational purposes only. This information is neither an offer to sell, purchase or subscribe for any investment nor a solicitation of such an offer. This information is general and does not take into account a person’s individual circumstances, objectives or needs. Investments carry risk and values may go up as well as down. Standard Chartered is not liable for any informational errors, incompleteness, delays, or for any actions taken in reliance on information contained herein.