How Does the U.S. Dollar Impact Latin American Investors?

For investors in Latin America who invest in international markets, especially in the United States, the U.S. dollar plays a central role.

It is not only the currency in which most global assets are priced, but it also introduces an additional factor to consider: the exchange rate.

Understanding how this impact works helps investors better interpret investment performance.

When a LATAM investor invests in dollar-denominated assets, their return does not depend solely on the performance of the asset (stock, ETF, etc.), but also on the variation between their local currency and the U.S. dollar.

This means there are two factors at play:

Both can influence the final outcome when funds are converted back into the investor’s local currency.

If the dollar strengthens against the local currency, the value in local currency of dollar-denominated assets may increase, even if the asset price itself has not changed significantly.

For example, if an investment maintains its value in dollars but the dollar appreciates against the local currency, the equivalent value in local currency could reflect an increase.

This phenomenon is known as the exchange rate effect.

Conversely, if the dollar weakens against the local currency, an investor may observe that even if their asset has increased in dollar terms, the return in local currency is reduced at the time of conversion.

In this case, the exchange rate acts as a factor that may diminish the positive impact of the asset’s performance.

Emerging market currencies often experience greater volatility than the U.S. dollar. Factors such as inflation, interest rates, political conditions, and broader macroeconomic dynamics can influence exchange rate behavior.

This means that investing in international assets also involves exposure to currency movements, in addition to market risk.

The U.S. dollar is considered a benchmark currency in international trade and financial markets. Many commodities, bonds, and financial assets are traded in dollars, reinforcing their global relevance.

For Latin American investors, this implies that part of analyzing the international economic environment includes observing the evolution of the dollar relative to their local currency.

Investing in assets denominated in another currency introduces an additional dimension: currency exposure. This can positively or negatively influence results, depending on the economic context.

Understanding this component allows for clearer interpretation of portfolio movements and recognition that final returns may be affected by more than one variable.

For Latin American investors who invest in international markets, the U.S. dollar is not just a currency — it is a factor that can influence overall investment outcomes.

The performance of an international portfolio is composed of asset behavior and exchange rate fluctuations. Understanding this dynamic allows investors to analyze results with greater context and clarity.

All investments involve risks, including the possible loss of principal. Past performance does not guarantee future results. The information contained in this document is provided for educational purposes only and should not be considered a recommendation or solicitation to buy or sell any security. Investors should evaluate their own objectives and risk tolerance before making any investment decisions.

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