Is it time to review my currency hedging strategy?

Investing outside your home market can open up new opportunities. But it may also create challenges from fluctuating exchange rates. We see three ways to hedge currency risks.

Currency risks arise from gains or losses in investments due to changes in the value of one currency against another (typically, the currency in the foreign market where you are investing versus your home currency).

And we think such risks are rising up the agenda for many investors. One reason is that many big economies increasingly move at different paces. Interest rates – one factor in determining exchange rates – are less synchronised than they have tended to be, as central banks adjust rates to suit the changing needs of their economies. Geopolitics – which have loomed large over markets in recent years – can also influence exchange rates.