The document discusses the recent strengthening of the US dollar relative to other currencies. It explains that the US Federal Reserve's policy of low interest rates has contributed to dollar strength as this policy may change. Other central banks have pursued accommodative monetary policies, weakening their currencies like the Euro. An appreciating dollar can negatively impact returns on international stocks and dampen demand for US exports. Companies with foreign sales are affected as US goods become more expensive abroad.

1. Market Perspectives – April 2015
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Overview: This month we look at impact of foreign exchange fluctuations. More
specifically, we explore the dynamics of the strength of the US dollar vs.
currencies around the world and the impact this has had on asset values. There
are a variety of reasons for the recent dollar strength, which we examine in more
detail in the slides that follow.
Foreign Currency

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Back to the Basics
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• The value of the dollar has risen considerably since the middle of 2014,
relative to other currencies. This is in large part related to the relative central
bank policies in each country. If a central bank in a particular country is
targeting a low interest rate (typically for the purpose of spurring growth) the
effect will often be a decline or weakening of the currency.
• Alternatively, if the central bank starts to tighten their policy and drives
interest rates upward, then the country’s currency may rise in value, or
strengthen.
• Currency fluctuations impact the purchasing power of individuals as well as
companies, and even governments, and can create swings in economic
growth (as we discuss later).

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How much has the US dollar risen?
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The US Federal Reserve Bank
has targeted a near zero
interest rate policy since the
financial crisis. Market
participants are currently
debating when this trend
will reverse. One of the
many outcomes of this
policy, a weak dollar for the
past several years, has given
way to significant dollar
strength as this policy looks
to change. This graph is an
index of the US dollar
against a basket of foreign
currencies.

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What has happened to the Euro?
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The European central
banks recently began a
program to add liquidity
via an asset purchase
program, with the goal
of lowering interest rates
and spurring growth.
This has resulted in the
softening (i.e. declining
in value) of the Euro. On
the right is a graph of the
Euro vs. the dollar since
1999. Since speculation
began about the ECB
action, the Euro has
fallen precipitously from
the 1.30‐1.40 range to
below 1.10.

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What impact does the appreciation of the dollar have on international investments?
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Currency impacts can hurt (or help) returns when measured on an absolute basis. Below are some
major markets with and without the impacts of currency over the last 52 weeks (through 4/7):
4.75%
16.10%
32.63%
26.08%
9.54%
2.82%
‐6.10%
‐8.22%
13.66%
‐0.31%
‐9.67%
‐26.99%
FTSE 100 (UK) CAC 40 (FRANCE) NIKKEI (JAPAN) DAX (GERMANY) AUX 200 (AUSTRAILIA) IBOVSEPA (BRAZIL)
52 Week Returns 52 Week Returns Adjusted for Currency

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What is the impact of strengthening dollar on US companies?
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• What are the impacts of a strong dollar on companies in the S&P 500?
• International consumers must pay a higher price in their local currency for American
products. In other words, US goods become more expensive to foreigners.
Companies with a significant percentage of sales from international customers are
negatively impacted.
• Alternatively, goods imported from foreign countries are more affordable for
Americans. This potentially helps volume growth for foreign multinational
companies and US domestic retailers with a significant percentage of their expenses
sourced from overseas.
• The combination of decreased demand for US goods from foreigners and increased
demand for foreign goods from Americans may have the overall impact of
dampening demand for American products.
• A decrease in demand may dampen the growth of the overall domestic
economy.
• This also could have the effect of spurring growth in Foreign export‐oriented
economies.

7. Market Perspectives – April 2015
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Conclusion: With currency volatility at extreme levels, investors may seek
to prudently hedge impacts via a hedging strategy. Companies may also
seek to dampen the economic impacts of swings of currency prices in a
similar manner. We closely monitor the impacts of currency on markets
and economies in order to uncover potential opportunities and manage
the associated risks.
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8. Opinions expressed in this commentary may change as conditions warrant and is for informational
purposes only. Information contained herein is not intended to be personal investment advice for any
specific person for any particular purpose. We utilize information sources believed to be reliable, but
cannot guarantee the accuracy of those sources. Past performance is no guarantee of future
performance; investing involves risk and may result in loss of capital. Consider seeking advice from a
professional before implementing any investing strategy.
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Disclaimer
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