Foreign Currency Effects
Categories: Forex, Econ, Accounting
Foreign currency effects is the effect of currencies changing in value relative to each other on the international market. Foreign currency effects will affect portfolios that have foreign assets.
For instance, if you have a brokerage account that’s entirely foreign assets, and your domestic currency rises in value relative to what you’ve got in there, then your foreign returns from your foreign investments have just been deflated a bit.
It’s kind of a constant win-lose or lose-win situation: when your currency is doing well, your foreign investments will be worth less...but when your currency takes a dip, your foreign investments will be your saving grace, since now they’re worth more.
If this sounds like a great way to hedge risk against your domestic currency, well, it can be, but not without risk. If another country’s currency declines too much, you might lose your assets altogether from foreign currency effects.
But YOLO, right?
Related or Semi-related Video
Finance: What is a Dual Currency Bond?33 Views
Finance allah shmoop what is a dual currency bond Well
a currency duel would be way cooler to bonds One
dusty road in the wild west a saloon a gal
and a gun plan retired or called are paid whatever
they call bonds when they're dead Anyway a duel currency
bond is a bond where the principal and the interest
payments are made in different currencies like here's a bond
whose principal is paid off in u s dollars But
its interest is paid in euros and yeah whatever currency
being used for interest payments is called the base currency
Well why would you the investor of want one of
these things Well dual currency bonds or subject to exchange
rate risk In other words you're making a gamble not
just on an investment but on which way the exchange
rate will bounce That is if you own something it's
highly exposed two euros while then you're kind of making
a bet that the relative to the dollar the euro
zehr gonna appreciate mohr like the government's printing less of
them You have less inflation whatever because then if that
repayment currency appreciates well boom you're more in the money
Than just the interest you collected And if that currency
doesn't appreciate well there's always bank robbery is a last 00:01:21.189 --> [endTime] resort dual currency dueling currencies No