The dollar

LEADERS AND LAGGARDS Leaders BOC Hong Kong was up 23.2% in July, supported by a broader rotation into Hong Kong banks and expectations for higher Federal Reserve interest rates that could sustain net interest margins for longer (the Hong Kong dollar is pegged to the US dollar).

We do not believe the US dollar is going significantly lower from here, even if rate cuts are slowly priced back into market expectations.

The US dollar strengthened modestly over the first half of the year, as the rise in oil prices, resilient US growth and a more hawkish Federal Reserve pushed US interest-rate expectations higher.

India was also a bright spot, up 9.8%, having stabilised after the Hormuz oil shocks as Brent prices collapsed, but partially offset by IT sell-offs and a stronger dollar.

To that end, the Fund uses forward currency contracts, where practicable, to hedge its perceived foreign currency exposure back into the US dollar.

The US dollar strengthened against most major currencies, including the euro, Canadian dollar, and Swiss franc, with more pronounced declines in the South Korean won, Japanese yen, and Swedish krona.

I believe that catalyst is a potential decline in the US Dollar, tied to policy changes emanating from the Trump Administration.

These funds may or may not be hedged to the US dollar, which will affect reported returns.

The MSCI EAFE finished down just 1.2%, even as the U.S. Dollar’s flight-to-safety rally turned currency movements from a 2025 tailwind into a headwind.

The US dollar strengthened again in Q2, in part due to the new Federal Reserve chair’s perceived hawkishness.

Under a wrap fee program, a client is charged a specified fee, which is not based directly upon transactions in a client’s account, for investment advisory services (which may include portfolio management or advice concerning the selection of other investment advisors) and execution of client transactions The US dollar is the currency used to express performance.

Where an investor’s own currency is not the US Dollar, due to exchange rate fluctuations between the two currencies, the performance of the investment may increase or decrease accordingly.

Outlook We see several structural drivers supporting international equities including continued attractive valuations versus the U.S., the potential for further U.S. dollar weakness, improving earnings growth as geopolitical tensions ease and increasing flows toward as broadening increases beyond U.S. mega caps.

While professional investors expecting 2026 to be year of lower interest rates and a weaker dollar have surely been disappointed, lower policy rates could now represent a surprise to many market participants.

That shock brought stagflation concerns back into focus, lifting rate expectations and the U.S. dollar while putting pressure on equity valuations.

The stronger interest rate outlook pushed the US Dollar Index to a one-year high and lifted Treasury yields, reducing the appeal of gold as a non-yielding asset.

Risks that could negatively impact returns include: fluctuations in currencies versus the US dollar, political/social/economic instability in foreign countries where the Fund invests lack of diversification, and adverse general market conditions.

Despite the U.S. dollar strengthening more recently as a safe haven asset during the Iran conflict, the potential for easing by the Fed and a weaker dollar would be an additional positive for international equity returns.

Risks that could negatively impact returns include: fluctuations in currencies versus the US dollar, political/social/economic instability in foreign countries where the Fund invests, lack of diversification, volatility associated with investing in small-cap securities, and adverse general market conditions.

This result was after adjusting for currency movements, which detracted from local market performance as the US dollar strengthened against most major foreign currencies.

The J.P. Morgan Domestic High Yield Index is designed to mirror the investable universe of the U.S. dollar domestic high yield corporate debt market.

Recent softness on the macro front and slowdowns to international exposure, due to a weaker dollar and weaker tourism, resulted in organic revenue growth expectations declining.

Currency As already mentioned, the yen has remained weak throughout the quarter, leading to the usual vague threats to defend it as its value approached 160 to the US dollar.