As the euro has risen, so has the value of assets denominated in it.

A higher dollar attracts foreign investors to assets denominated in the currency.

Individuals and institutions who own equities, government bonds, cash, or other assets denominated in foreign currencies are exposed to fluctuations in the foreign exchange market.

On the other hand, the huge Japanese investment in monetary assets denominated in dollars is not in the long-run interest of either country.

A stronger dollar makes assets denominated in it, like Treasury securities, more attractive.

That may have prevented Japanese institutions from selling assets denominated in dollars.

Rising rates increase the appeal of assets denominated in euros.

The value of assets and liabilities denominated in the home currency will not be affected by changes in the exchange rate.

A variant of the final equation with assets denominated in real terms is discussed below.

Zhou explained global currency diversification was needed because an over-concentration of foreign assets denominated in the dollar may bring about undesired consequences.