Currency risk and office investment in Asia Pacific

The exchange rate risk of a single foreign country office investment can be substantial, as currency conversions can reduce foreign currency-denominated return by 10,200% and amplify risk by about 580%. However, the impact of currency volatility on return and risk is statistically insignificant. The potential gain from international office property investment diversification is substantial. The hypothesis that currency risk has a significant impact on the return from a fully diversified international office investment is rejected. The relatively low positive correlations, and even negative correlations between exchange rate returns and unadjusted office returns, vis-a-vis the relatively low positive negative intercountry correlations of exchange rate returns and office returns, enable movements between the exchange rate returns and a fully diversified office portfolio return over time to provide a natural hedge against exchange rate volatility