YOUR PORTFOLIO
A tale of two currencies
114.4 % – gains made by the MSCI Turkey index in 2022
Investors are often warned against trying to make money out of currency fluctuations and are advised to focus instead on the quality of underlying businesses when allocating money overseas . However , a strong business model isn ’ t much good if the company operates in an emerging market with a volatile political backdrop where rulers don ’ t concern themselves with the rule of law . Such conditions tend to go hand in hand with currency instability , where any gains made by investors can be wiped out when exchange rates move violently against them .
Fortunately , this can work the other way as well . While positive movements in emerging market currencies don ’ t tend to be quite as dramatic as negative ones , they can act as a multiplier for long-term returns . You don ’ t need to look too far for examples of emerging market currencies that rallied or collapsed over short periods . In fact , you don ’ t even need to look beyond last year . Over the next few pages , a selection of analysts reveal what was behind the swings in the Brazilian real and Turkish lira in 2022 and explain what this meant for investors .
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