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Investors need to know about currency volatility

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ETF Securities Currency Research -  Investors need to know about currency volatility Investing internationally requires more careful analysis, with currency risks adding to potential investment pitfalls.

ETF Securities Currency Research –  Investors need to know about currency volatility

Summary

  • Investing internationally requires more careful analysis, with currency risks adding to potential investment pitfalls.
  • Currency returns have recently demonstrated that they can overwhelm movements in foreign assets both on the upside and downside.
  • Current macro trends should see FX volatility persist in 2016 keeping currency hedging high on the agenda for international investors.

Download the complete report (.pdf)

Currencies impact investors

Investing should be a conscious decision by individuals. However, there is a critical part of the investment decision that many investors in foreign assets are not taking into account: currency movements. Most investors trade currencies, but often it is not an active decision. Regardless of the asset class, if an investor is purchasing offshore assets, a currency transaction is being entered into and if this is not taken into account, risk is being understated.

Any offshore investment involves a currency position, unless it is offset by hedging. Whether it is US or emerging market equities, commodities or bonds, any investment that is a denominated in a foreign currency for the investor will involve a currency exposure. It is important for investors to be fully aware of the currency exposures within their portfolio, as it can have a significant impact on investment returns.

As seen in the following chart, the currency component of US equity returns has been significant and varied. The example highlights the returns from a US equity portfolio in 2015, from the perspective of a UK investor. An investment in the MSCI US index would have returned nearly 5% over the course of 2015, largely due to favourable currency movements. The US Dollar strengthened nearly 6% against the British Pound in 2015, offsetting the -0.75% decline in the underlying US equity benchmark.

Although overall the currency movements in GBP/USD and EUR/USD have been favourable, because of the broad based strength in the US Dollar in 2015, there has been significant volatility of currency returns on a month to month basis. This volatility and the resulting magnitude of movements in the currency markets have made the topic of currency hedging a key investment theme of 2015.

ETFS1

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Peak US Dollar and hedging

The Fed’s rhetoric indicates that the central bank is likely to continue its gradual rate hike path in 2016. The market continues to discount the appetite for the Fed to raise rates, expecting just one rate hike by year-end. In turn, near-term strength could turn into longer-term weakness for the dollar.

ETFS2

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Indeed, if, as we believe, the USD peaks by end-Q1 2016, investors will need to be closely attuned to the level of currency volatility and the potential for a falling USD to have an adverse impact on portfolio returns. Our expectation for a USD peak in coming months suggests investors in foreign assets should look to hedge foreign currency (particularly USD exposures).

Volatility to continue to impact returns

While currency volatility has softened in early 2016, it remains elevated from a historical perspective. During the remainder of 2016 a number of factors look set to keep FX markets unsettled. Thus, international asset managers need to remain conscious of inherent currency risks they may assume through offshore assets, because currency movements are rarely neutral.

ETFS3

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Commodity feedback loop for FX volatility

As an asset class, commodities are unique for non-US investors: the investable universe is denominated in US Dollars and therefore should be considered by any non-USD denominated investors as a foreign asset with inherent currency risk. The majority of commodity investors situated outside of the US are therefore directly exposed to currency fluctuations. Unless a commodity investment is hedged, movements in the exchange rate between the US Dollar and the investor’s own domestic currency, directly impact the returns from commodity investments. For example, in 2015 the price of gold fell by 10.5%, but for European investors this loss was limited to 0.3%, due to the 10.2% appreciation of the US Dollar against the Euro over the same period.

ETFS4

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While currency movements can impact commodity returns, the two asset classes also have other linkages. The highly publicised slump in commodity prices has been a contributing factor to the current elevated level of currency volatility and looks set to remain a catalyst for further currency gyrations in the year ahead.

Commodity prices can impact currencies through inflation dynamics. In particular, the current low price of energy is depressing inflation expectations and is making the future path of global monetary policy less predictable. Central bank activism has been a key driver of currency market movements and the prospect of increasingly uncertain monetary policy is likely to keep currency volatility raised.

ETFS5

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In addition, falling commodity prices have damaged the terms of trade for commodity exporters globally and the impact is unlikely to be short-lived. Reduced investment and job losses in resource sectors worldwide will continue to filter through to economic performance throughout 2016 and create instability for currencies underpinning exporting nations.

EM and the demand for safe-havens

ETFS6

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Uncertainty surrounding China and lapses in confidence can cause sharp appreciation of currencies that are traditionally considered a safe haven, such as the CHF and JPY. Investors with exposure to safe haven currencies or EM currencies directly should be aware of the effects that a short term crisis of confidence can have on these currency markets.

These factors have potential to maintain currency volatility at elevated levels throughout 2016 and should give investors pause for thought regarding the source of investment returns for foreign assets in the year to come.

For more information contact

ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
E info@etfsecurities.com

Important Information

General

This communication has been provided by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority.

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Börshandlade fonder för den som vill investera i skogen

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Timmer och skogar är garanter för att mildra klimatförändringarna och en naturlig träkälla. Skogarna täcker stora landområden, utgör en oumbärlig åtgärd för att minska koldioxidutsläppen och är de främsta producenterna av syre. Det finns även börshandlade fonder för den som vill investera i skogen.

Timmer och skogar är garanter för att mildra klimatförändringarna och en naturlig träkälla. Skogarna täcker stora landområden, utgör en oumbärlig åtgärd för att minska koldioxidutsläppen och är de främsta producenterna av syre. Det finns även börshandlade fonder för den som vill investera i skogen.

Detta ger möjligheter för företag som äger skog eller är inblandade i skogsskötseln. Träförädlingsindustrin är också en del av denna trend, liksom börsnoterade skogsfonder i form av REITs (Real Estate Investment Trusts). Dessa företag kan användas för att skapa ett index.

I den här investeringsguiden hittar du alla ETFer som gör att du kan investera i skogen. För närvarande finns det ett index tillgängligt spårat av två olika ETFer som båda har en årlig förvaltningskostnad på 0,65 procent.

Skogs-ETFer i jämförelse

När man väljer en ETF för skogsbruk bör man överväga flera andra faktorer utöver metodiken för det underliggande indexet och prestanda för en ETF. För bättre jämförelse hittar du en lista över alla skogs-ETFer med detaljer om namn, kortnamn, kostnad, utdelningspolicy, hemvist och replikeringsmetod. För ytterligare information om respektive börshandlad fond klicka på kortnamnet för att ta del av allt vi skrivit om dessa.

Namn
ISIN
KortnamnAvgift %UtdelningspolicyHemvistReplikeringsmnetod
iShares Global Timber & Forestry UCITS ETF
IE00B27YCF74
IUSB0.65%UtdelandeIrlandFysisk replikering
iShares Global Timber & Forestry UCITS ETF USD (Acc)
IE0003ZXNJY5
WOOE0.65%AckumulerandeIrlandFysisk replikering

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EDOG ETF med fokus på telemedicin och digital hälsa

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Global X Telemedicine & Digital Health UCITS ETF Dist GBP (EDOG ETF) med ISIN IE00BLR6QC17, försöker följa indexet Solactive Telemedicine & Digital Health. Solactive Telemedicine & Digital Health-index spårar företag över hela världen som är verksamma inom området telemedicin och digital hälsa.

Global X Telemedicine & Digital Health UCITS ETF Dist GBP (EDOG ETF) med ISIN IE00BLR6QC17, försöker följa indexet Solactive Telemedicine & Digital Health. Solactive Telemedicine & Digital Health-index spårar företag över hela världen som är verksamma inom området telemedicin och digital hälsa.

Den börshandlade fondens TER (total cost ratio) uppgår till 0,68 % p.a. Global X Telemedicine & Digital Health UCITS ETF Dist GBP är den billigaste ETF som följer Solactive Telemedicine & Digital Health-index. ETFen replikerar det underliggande indexets prestanda genom fullständig replikering (köper alla indexbeståndsdelar). Utdelningarna i ETFen delas ut till investerarna (halvårsvis).

Global X Telemedicine & Digital Health UCITS ETF Dist GBP är en mycket liten ETF med tillgångar på 0 miljoner euro under förvaltning. Denna ETF lanserades den 17 december 2020 och har sin hemvist i Irland.

Skäl att överväga EDOG

Hög tillväxtpotential: Den globala telemedicinmarknaden ökade med 35 % från 2019 till 2020 och översteg 55 miljarder dollar. Prognoser tyder på att marknaden kan nå nästan 300 miljarder dollar år 2028 (Källa: ”Telemedicine Market Size, Share & Trends Analysis Report By Component” Grand View Research, februari 2021).

Strukturella medvindar: Under 2019 saknade uppskattningsvis hälften av världens befolkning nödvändig hälsovård. När mer underbetjänade marknader får tillgång till bredband erbjuder telemedicin stora möjligheter att överbrygga klyftan (Källa: World Economic Forum).

Nya konsumentinställningar: Pandemin ökade antagandet av digitala hälsotjänster, med många vänder sig till telemedicin för första gången, vilket påskyndade temats räckvidd.

Handla EDOG ETF

Global X Telemedicine & Digital Health UCITS ETF Dist GBP (EDOG ETF) är en börshandlad fond (ETF) som handlas på London Stock Exchange.

London Stock Exchange är en marknad som få svenska banker och nätmäklare erbjuder access till, men DEGIRO gör det.

Börsnoteringar

BörsValutaKortnamn
London Stock ExchangeGBPEDOG

Största innehav

Vikt (%)KortnamnNamnLandSEDOL
4.87PODD USINSULET CORPUnited StatesB1XGNW4
4.57DOCS USDOXIMITY INC-CLASS AUnited StatesBMD22Y4
4.55HIMS USHIMS & HERS HEALTH INCUnited StatesBN46048
4.28RMD USRESMED INCUnited States2732903
4.23DGX USQUEST DIAGNOSTICS INCUnited States2702791
4.22TWST USTWIST BIOSCIENCE CORPUnited StatesBGKG6G7
4.06TNDM USTANDEM DIABETES CARE INCUnited StatesBF3W461
4.05QGEN USQIAGEN N.V.United StatesBMGBZP0
4.05LH USLABCORP HOLDINGS INCUnited StatesBSBK800
4.02OSCR USOSCAR HEALTH -AUnited StatesBKY83Q6

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The Dogecoin story: The emerging “intrinsic value”

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Like Bitcoin, Dogecoin uses a proof-of-work (PoW) consensus mechanism but runs on its own blockchain, originally forked from Litecoin. It uses the Scrypt hashing algorithm, which is less resource-intensive than Bitcoin’s SHA-256, making mining more accessible to everyday users with consumer-grade hardware. Due to merged mining with Litecoin, Dogecoin benefits from shared infrastructure, with hashpower recently reaching all-time highs of 2.7 petahashes (quadrillion hashes) per second, making the network increasingly difficult to attack.

Like Bitcoin, Dogecoin uses a proof-of-work (PoW) consensus mechanism but runs on its own blockchain, originally forked from Litecoin. It uses the Scrypt hashing algorithm, which is less resource-intensive than Bitcoin’s SHA-256, making mining more accessible to everyday users with consumer-grade hardware. Due to merged mining with Litecoin, Dogecoin benefits from shared infrastructure, with hashpower recently reaching all-time highs of 2.7 petahashes (quadrillion hashes) per second, making the network increasingly difficult to attack.

Dogecoin’s design is built for speed and utility, has no maximum supply, and confirms blocks every minute (10x faster than Bitcoin). Moreover, it maintains ultra-low transaction fees, which is ideal for tipping, microtransactions, and everyday use.

More than a meme

Although its supply is technically unlimited, Dogecoin’s issuance model is clear and predictable. Approximately 10,000 DOGE are mined every minute, adding up to around 5.25 billion new tokens each year. As the supply base expands, this fixed issuance creates a natural disinflationary trend that has cut nearly in half over the past decade while ensuring network security through consistent miner rewards.

Dogecoin’s technology fosters an aligned ecosystem between users and miners. With sustainable economic incentives, it acts as a kind of “retail Bitcoin”, built not just for hoarding but for real-world use, too.

While Dogecoin began as a lighthearted experiment, its evolution has proven it to be far more than a meme. Thanks to its speed, low fees, and strong community backing, Dogecoin has grown into a functional digital currency with a range of real-world use cases. From payments and merchant adoption to infrastructure development and charitable giving, Dogecoin continues to demonstrate its staying power as a practical and accessible tool in the broader crypto ecosystem.

Dogecoin as a payment tool

Dogecoin has transformed into a widely accepted digital currency, embraced by major brands like Tesla, AMC, Newegg, and the Dallas Mavericks. With fast transaction speeds and low fees, even amid surging transaction volumes, it has become a practical option for everyday payments. Crypto payment processors like BitPay have further expanded its reach, enabling thousands of merchants worldwide to accept DOGE. Most recently, The Open House Group, a prominent Tokyo Stock Exchange-listed real estate firm, added Dogecoin to its supported list, making it one of the few digital assets accepted for property transactions.

Enhancing Dogecoin’s payment infrastructure

Initiatives like Dogebox and GigaWallet are simplifying DOGE integration for businesses, while its scaling solution, Laika, is making meaningful progress in improving transaction speed and reducing costs.

Meanwhile, RadioDoge is working to expand access by enabling offline transactions in remote regions through low-cost radio and Starlink technology, advancing global crypto inclusion. A rumored integration with Elon Musk’s X platform could extend Dogecoin’s utility across digital tipping and commerce. These efforts collectively reinforce Dogecoin’s growing relevance in real-world payments and its potential as a frictionless, decentralized transaction layer.

Do Only Good Every Day

As we’ve seen, community drives memecoins, and Dogecoin’s community shines the brightest. This global network not only thrives on memes but also channels that energy into social good. From funding clean water in Kenya to sending Jamaica’s Bobsled Team to the Olympics and raising over $1 million for Ukraine relief, DOGE’s community transforms internet culture into real-world impact. Low fees and fast transactions make it a favorite for grassroots giving, showing a coin born as a joke can leave a lasting legacy. Dogecoin is more than a digital asset—it’s a movement powered by a community that believes in doing good every day.

Research Newsletter

Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com

Disclaimer

The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.

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