Furthermore, supported by the weakness in the greenback, the FTSE Emerging Index showed a 35% return for the 12-month period ended January 5, 2018 in U.S. dollars as compared to a 29% local currency-denominated return.
ETF investors can also gain exposure to the FTSE Emerging Index through options like the PowerShares PureBetaSM FTSE Emerging Markets Portfolio (BATS: PBEE), which is based on the FTSE Emerging Index, and the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO), which tries to reflect the FTSE Emerging Markets All Cap China A Inclusion Index.
“Currency translation is an important component of the diversification potential of foreign stocks and the relative performance of international stocks as measured by non-US indexes for US investors,” Alec Young, managing director of global markets research for FTSE Russell, said in a note. “For example, a rising US dollar relative to non-US currencies will have a negative impact on US dollar-based non-US index returns. On the other hand, a falling US dollar relative to non-US currencies will have a positive impact on US dollar-based non-US index returns. Last year was a case in point as a weak US dollar led to significantly higher dollar denominated international equity index performance across both developed and emerging markets.”
For more information on the international markets, visit our global ETFs category.