How do currency fluctuations affect international investments?
One risk factor investors have to take into consideration when investing overseas is currency fluctuation. A U.S. investor’s foreign investment returns depend on both the foreign assets’ market value in terms of the local currency, as well as the currency’s exchange rate against the U.S. dollar, since the foreign assets will be converted into dollars at some future date. For a U.S. investor, an investment gain arises when the value of the dollar falls against the currency in which a foreign security is denominated. An appreciation of the dollar against the foreign currency could result in a loss regardless of how well the foreign security performed. However, the shares of The Halter USX China Index constituents are denominated in dollars so the foreign exchange factors are indirect.
