A foreign investor investing in the Australian equity market will have its foreign currency denominated return reduced if the Australian dollar appreciates relative to the foreign currency.

Question

Quizplus · Accepted Answer

For example,assume the EUR/AUD = 1 and the profit in AUD = 200 = EUR 200.If the Australian dollar appreciates relative to the Euro to EUR/AUD = 2,then the Australian profit and return remains unchanged at $200.The profit in Euros is now 100,which is a decrease of 50%.

A Foreign Investor Investing in the Australian Equity Market Will