Currency movements were significant this week, as investors took on greater risk in the global equity markets, with U.S. investors benefiting the most from currency crosses in resource-rich countries such as Brazil and South Africa.

Indeed, strength in the Brazilian real, the South African rand and the New Zealand dollar this past week enhanced returns for U.S. investors with exposure to equities in those countries.

On the negative side, a stronger U.S. dollar against the euro this week had U.S. investors trailing their European counterparts.

Fluctuating currency crosses, as shown in our weekly Currency Impact Report, don’t become real gains or losses until U.S. investors exit those positions. Nevertheless, they have become a much bigger—and underappreciated—part of returns in modern globalized investment markets.

Below are last week’s noteworthy talking points on the currency front:

• Currency impact for U.S. investors last week was especially significant in resource-rich countries like Brazil, New Zealand and South Africa. Meanwhile, the euro depreciated against the U.S. dollar, resulting in U.S. investors in Europe trailing their European counterparts by 0.41 percent in European equities.
• U.S. investors saw the biggest boost in gains as a result of appreciation in the South African rand. Local investors in the South African equities market saw returns of 0.91 percent last week, while U.S. investors saw returns of 3.37 percent. The rand appreciated against the dollar after South Africa’s third-quarter deficit remained unchanged at 6.4 percent, less than the 6.7 percent median estimate expected by economists.
• The Brazilian real rallied last week, with U.S. investors in Brazilian equities experiencing returns of 2.28 percent, while local investors saw returns of 0.91 percent. The real rallied after Brazilian Finance Minister Guido Mantega told reporters that the government may unwind capital controls in an effort to curb the real’s gains. Ironically, this resulted in an upward tick in the real against the dollar, as investors took the statement as a sign that the Brazilian government was less likely to use a weaker real to stimulate growth.
• The New Zealand dollar also rallied in the past week, giving an additional boost to U.S. investors in New Zealand equities. Local New Zealand investors trailed their U.S. counterparts by 1.50 percent as a result of the New Zealand dollar’s depreciation against the U.S. dollar. The so-called kiwi rallied after the New Zealand Central Bank kept interest rates unchanged—an indication that growth may increase in New Zealand.