By Salvatore Bruno via Iris.xyz
With US equities continuing to swim near all-time highs this summer, many investors are seeking growth opportunities in other markets. The great news is that international equities offer a variety of benefits, including positive growth forecasts for 2018, highly attractive valuations, and a dividend yield that is currently as much as 50% higher than yields of many US equities. With all those factors at play, it’s no wonder flows into non-US equities have continued to skyrocket.
However, as any experienced investor knows well, international equities also introduce a hazard that has the potential to thwart even the greatest investment opportunities: currency risk. Because the US dollar and the euro together comprise about 40% of the world’s Gross Domestic Product (GDP), the dollar-euro exchange has an enormous impact on global asset prices. At the same time, that exchange rate has demonstrated a highly uncomfortable level of volatility, fluctuating by about 20% a stunning eight times in the past decade alone. Combine that reality with other currency-related risks, such as the ever-changing economic fundamentals of foreign nations, inflation levels, interest rates, and central bank policy, and the potential for foreign exchange volatility is huge.
Click here to read the full story on Iris.xyz.