Ch.10 · Benchmarks and Performance Evaluation · medium
What is 'currency risk' (exchange rate risk) in mutual funds?
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EXPLANATION
Currency risk affects international and overseas funds. When an Indian fund invests in US stocks, returns depend on both stock performance and USD/INR exchange rate movements. If the rupee appreciates against the dollar, the INR value of the US investment falls even if the US stocks perform well. Funds may hedge currency risk using derivatives.
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