If you’re invested in currencies, then any movement will impact your portfolio. But even if you’re not, the value of household wealth could change if the currency of reference changes. According to the Credit Suisse Research Institute’s Global Wealth Report 2016, while currency fluctuations were ‘unusually restrained’ this year compared to previous years, they made some big changes in how wealth was calculated for countries.
Wealth for the purpose of this report is calculated by subtracting the value of household debt from the sum of financial assets and non-financial assets held by households.
Here’s a list of countries that were impacted the most, whether positively and negatively, because of currency movements.
Japan
With $24 trillion wealth, defined as assets in excess of household debt, Japan is the second wealthiest nation according to the Global Wealth report, edging past China in 2016. The world’s third largest economy by Gross Domestic Product (GDP) saw the difference between its household assets and debt remain flat, but its wealth in dollars jumped 19% compared to the previous year due to an appreciation in the Japanese yen (JPY) versus the dollar.
United Kingdom
The vote for Brexit came as a shock to the financial markets as both equities and currencies plunged. With equities in a free fall and the pound sterling (GBP) dropping over 15% in the aftermath of the vote, the Credit Suisse report estimates that $1.5 trillion of household wealth was wiped out from the United Kingdom.
China
To combat slower growth China devalued the yuan (CNY) in August 2015, sending financial markets and related Asian currencies in a downward tizzy. While currency depreciation would mean that the same amount of Chinese wealth is worth less in dollar terms, the world’s second fastest growing economy still recorded an increase in wealth primarily on the back of real estate. Chinese assets net of debt grew by 2.1% to $23.3 trillion even as it slipped one spot from the second place in the list of wealthiest nations. The report estimates that China lost $680 billion on account of currency depreciation and erosion of market capitalization.
Russia
Between June 2015 and June 2016, the Russian ruble (RUB) fell over 16% against the dollar. While a depreciating currency is just one of the problems plaguing the Russian economy, it was one that had an impact on wealth as assets were worth less in dollars. This shrank the gap between assets and debt and the country's total wealth for 2016 came in at $1.1 trillion, lower by 14% compared to the previous year.
Read more: How Currency Fluctuations Impacted 2016 Wealth | Investopedia http://www.investopedia.com/articles/trading/112916/how-currency-fluctuations-impacted-personal-wealth-2016.asp#ixzz4a6CAWRug
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