No need to hedge against the loonie
International Diversification works just as well
Jonathan Chevreau National Post
Excerpt from article
................"Andrew Teasdale President of TAMRIS Consultancy, says the relative value of the US and Canadian dollars is a global issue - "not just an exchange rate bewteeen two closely related economies."
He says its "unfortunate" the US$ is declining while global demand for commodities is rising. This is placing additional pressure on the loonie and the stocks of companies producing commodities.
High interest rates and high exchange rates are not good for balanced economies, especially those with Canada's dynamics. "The current C$ rate is too high in this context", Teasdale says.
Teasdale doesn't believe investors should hedge foreign securities back into Canadian dollars.
"Hedging a currency effectively takes away the natural hedge of international diversification and increases your portfolio's exposure to the specific risks of the domestic economy."
International diversification is a true hedge, which is what the fund companies have been saying all along.