A new report from Eckler Ltd., Currency crosswinds: How U.S. dollar ups and downs shaped Canadian investor returns, suggests that a balanced portfolio in 2024 (consisting of 40 per cent Canadian universe bonds and 60 per cent global equities) could attribute roughly one-third of its total annual return to USD appreciation. That said, they add that over the longer term, foreign exchange gains and losses generally offset each other.
“Time horizon is therefore a key consideration for Canadian investors when evaluating currency exposure,” they write.
They add that most Canadian investors have significant U.S. dollar exposure in their portfolios. In 2024 the CAD/USD exchange rate exhibited significant volatility, falling from $0.75 to $0.69 over the course of the year, before rebounding sharply in the first half of 2025.
“Exchange rate fluctuations often significantly impact Canadian investor returns in any given year. In 2024, USD appreciation accounted for roughly one-third of total portfolio gains in a typical balanced portfolio. Although gains and losses from foreign currency exposure over longer time horizons tend to offset, the magnitude of short-term fluctuations driven by currency may be relevant for investors with shorter time horizons,” the report states. “Over the long-term, currency effects are not material.”
