Weaker Aussie Dollar Boosts Unhedged Global Shares for SMSFs

The Australian dollar has fallen sharply this week, causing the value of unhedged overseas assets in SMSFs to rise when measured in Australian dollars. This is because a weaker Aussie dollar increases the number of local dollars that can be exchanged for each foreign currency unit.

For example, if an SMSF owns shares priced in US dollars and the Aussie dollar falls, each US dollar converts into more Australian dollars, increasing the reported value even if the overseas share price remains unchanged. Conversely, a stronger Aussie dollar reduces the local value of unhedged assets.

The currency's fluctuations can add to or subtract from returns in ways unrelated to the underlying businesses. The Reserve Bank's decision next week and the Federal Reserve meeting in October are expected to influence the Australian dollar's value, alongside other factors such as commodity prices and global risk appetite.