Why Doesn't the I Fund Return Match the EAFE index?

**tsptalk** · 02-29-2004, 05:03 PM

In my comments on Friday, Feb 27th, I said the following:

"The Asian markets were up solidly on Wednesday night and Thursday the EAFE was flat to up slightly. So why the I fund was down .07 yesterday is beyond me. "

Thanks to one of our readers, I now have a better understanding. Here was his response:

The daily value of the I fund depends on the change in value of the US dollar on that particular day relative to the local currencies of the markets that make up the I fund. In other words, if all of the international stock markets stayed absolutely flat with no rise or fall in value then the I fund would still change on a daily basis because of the change in the exchange rate of the dollar.

This was particularly noticeable last week. If you were looking at the world markets there were several times that they were up YET the I fund was down. The reason for that is the dollarâ€™s recent rebound in value. The world markets would be up but the change in the exchange rate would offset the gain.

The reason the I fund did so well last year was twofold: The world markets rose in value AND the dollar decreased in value.

This makes predicting the I fund even more difficult. Not only do you have to anticipate the market direction. You also have to know what the dollar is going to do.

**Wheels** · 03-15-2004, 01:06 AM

It's Sunday night and the Euro is getting hammered. The Sterling is down too. This could translate into a stronger dollar and therefore not a great day for the I fund on Monday.

Dave :X

**Wheels** · 03-15-2004, 01:29 AM

Oops. While the Euro and Strerling WERE getting hammered (due to the opposition party being voted in in Spain) they have since recovered and it is now the dollar that is trading slightly lower.

So nevermind.

Dave