David wrote:
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If an American buys a Canadian ADR, his return on that stock, ignoring
compounding effects, equals the return of the Canadian stock in local
currency terms plus the price return on the Canadian dollar. So I buy a
Canadian ADR that rises 15% in C$ terms, and the C% falls by 5% against
the dollar, my $US return is 15% - 5% = 10%. From your email address, I
guess that you may be Canadian. The logic above applies if you
interchange Canada and the U.S. everywhere.

If as an American I wanted to hedge C$ currency risk from ADRs, I could
sell Canadian dollar futures contracts on the Chicago Mercantile
Exchange. Most individual investors could, more realistically, try to
find a foreign stock mutual fund that says it systematically hedges
currency risk. Foreign stock funds have differing policies about
currency hedging, which should be disclosed in their prospectuses.

For a Canadian buying an American ADR or the reverse, I don't think the
USD vs. Euro exchange rate is relevant.

can someone tell me the net effect of purchasing an ADR in canadian
currency if the US$ goes down but the EURO$ goes up. how can you
measure or predict the net currency effect. is there any way to
purchase depository receipts excluding the us$ currency risk? thank you