How currency affects returns

In the aftermath of the bear market, a valuable means of generating returns to investors is being overlooked

The Sandler review highlighted the importance of asset allocation in generating returns for investors and many fund managers are keen to stress the importance of stock picking. But very few investors are fully aware of how picking the right currency exposure can help to enhance returns. The emergence of the euro might mean there are fewer currencies to choose from than there were a decade ago but, as the charts and tables show, there is still plenty of variety on offer from picking the yen, dollar, sterling or euro. At a time when globalisation is on the rise, the impact of currency is likely to increase rather than diminish, as can be seen from the impact of foreign exchange on turnover at major companies such as Vodafone.