The past year Canadian equity investors have ad to accept that the index is likely to more volatile due to its high concentration in two cyclical factors. The market’s volatility over the course of the year serves as a reminder of the importance of international currency diversification within portfolios - not only to help control the effect of being exposed to weakness in the domestic currency market but also to provide exposure to greater breadth and / or a different mixture of foreign currency instruments .
The headwinds created by the rising Canadian dollar currency have eroded return on foreign holdings in recent years.
Clearly the significant role and significant risks clearly highlight the roles played by foreign currencies. While this has been frustrating , it does present investors and speculators an opportunity to acquire foreign currency holdings at a substantially reduced costs versus previous trend and holding patterns.
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