For investors, a choice to limit exposure to domestic currency is not tenable. The range of assets excluded is just too wide. Consequently, they must consider the foreign exchange market, and the perennial challenge of managing exchange rate exposure. Today, most currencies float freely or are managed by their Central Bank to maintain a close relationship with the US dollar. The most important example of this is China, where – notwithstanding the political noise of recent years – the  People’s Bank of China keeps the RMB closely aligned to the dollar. Importantly, this broadly floating exchange rate era is relatively…

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