COVER STORY
Currency hedging
“ We think the dollar is now expensive and that US equities are a bit too popular a place to hide from the problems of the past couple of years ”
encourage investors to buy assets where the currency means you get more bang for your buck … or pound . And , to an extent , in managing our funds we do that .” If you are going to take this approach , Edelsten says you need to factor in interest rates , which are a key determinant of currency prices . He points out that over the past year , traders could borrow in Japan where interest rates were zero and leave money in the US where they rose to
4.5 %. While exchange rate movements should counterbalance this effect , this wasn ’ t the case last year . “ At the start of 2022 , a dollar cost ¥ 113 . Towards the end , those dollars could be sold to buy back yen at ¥ 137 , a 20 % currency gain on top of the 3 to 4 % interest rate gain ,” the manager adds . However , Edelsten points out that when currency trends eventually reverse , they can do so sharply and suddenly . He says that if we are
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