Oil-heavy Norwegian krone, industry-based Swiss franc and US dollar each has its own behaviour
US dollar, euro and Swiss franc banknotes. Picture: REUTERS
When things are tough in energy-based Norway things could be fine in pharmaceutical-exporting Switzerland and your “drugs and oil” portfolio will earn in dollars as the global default currency. The Swiss franc or Swissie, is a good example, given Switzerland’s geopolitical advantages and its strong economic and financial systems. Thus, adding such currencies to a portfolio could be a good way to add to investment returns while lowering risk.
If nothing else, this emphasises that currencies can be volatile. If managed well, volatility can be a blessing; if not, volatility is a source of risk or even destruction. However, simply buying other currencies is not good diversification — rather, acquiring other currencies at good valuations makes for good diversification.
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