Using Currency to Hedge Risk in Emerging Markets

You can use currency to hedge against commodity price fluctuation, Trump's trade threats and even inflation

T. Rowe Price 14 July, 2017 | 9:55AM
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This article is part of the Morningstar's Guide to Emerging Market Investing. Here, as part of our Perspectives series, Andrew Keirle, portfolio manager of the T. Rowe Price Emerging Local Markets Bond Fund explains how currency can impact returns.

Actively managing currency positioning, rather than passively focusing on beta, is critical when investing in emerging markets local currency bonds.

While coupons have delivered most of emerging markets returns over the past decade, currency has been a major source of risk. Recent experience highlights the importance of considering these sources of risk and excess returns of a portfolio – and of isolating the individual drivers.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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T. Rowe Price  T. Rowe Price is a global investment management firm dedicated to helping clients achieve long term success.

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