Currency movements often produce a wild ride for investors, but 2016 was a year for the ages. The pound sterling tumbled to a 30-year low, the euro declined sharply in the fourth quarter, and the U.S. dollar staged a remarkable bull run.
What’s in store for 2017? In my view, the roller coaster won’t stop, but the ride should be less bumpy. That’s important because currency fluctuations can have a big impact on investment results. In 2016, for instance, European stocks enjoyed a robust 7% gain in local currency terms. But for dollar-based investors, currency movements eliminated all of those gains, producing a loss of –0.4%.