How to hedge against devaluing pound with savings?

mgdavid

anonymon wrote: »

What you've said there doesn't really make sense. I'm trying to hedge against the risk of any one currency devaluing substantially. At the moment all my money is in GBP, supposing it was to become worth half as much relative to the Euro, and I end up living in Germany, I will be much worse off.

(If I did know which currency I was to be spending I would not want to hedge against it...)

(Also FWIW I think you're wrong in your assertion that it is not useful to hedge against your own currency even if you only spend money in that currency, but that is a separate discussion.)

Unfortunately what you are saying in your posts does not make sense to me either, so we had better agree to disagree.

IronWolf

jon-w wrote: »

Can you explain how Ironwolf?

I make a spreadbet on a currency pair based on the size of my holding in the foreign currency.

So say I buy a share for US$10,000, I will stand to lose about £330 if the GBP/USD increases by 5% between my buy date and sell date. So I bet long GBP/USD futures at about 40p per pip, which will make me about £330 on a 5% increase. The bet gets rolled over every 3 months as the futures contracts expire.

It's better to spreadbet the futures rather than the live Forex as you pay the spread once every 3 months as opposed to every day with a rolling daily Forex bet.

It is complicated by the fact that the shares can increase or decrease in value so position sizing can be hard to get right, but in principle its just trying to cover my expected losses/winnings if the exchange rate moves.

masonic

anonymon wrote: »

I'm trying to hedge against the risk of any one currency devaluing substantially.

Just out of interest, if one of those three currencies you mention (USD, EUR, GBP) did happen to devalue substantially against the others, which of those currencies do you think it would most likely be? Also, having spread your money between the three currencies, what do you think happens to your overall likelihood of suffering a loss in the value of your savings due to exchange rate movements?