Currency Risk, Still An Afterthought?

Currency Risk, Still An Afterthought? by Anton An, Matthews Asia

The recent slowdown in emerging markets and the anticipation of a U.S. Federal Reserve tightening cycle have wreaked havoc on many Asian currencies. What was once an afterthought for equity investors has now become a front and center concern.

There are various line items in financial statements that may be denominated in non-local currencies. For example, in some major cities, landlords of marquee commercial properties may charge rent in U.S. dollars. Fuel costs, which often make up 25% to 30% of the airline industry’s base costs, are also typically priced in dollars. When gauging balance sheets, it behooves investors to double check whether liabilities and debt are denominated in...