Sterling weakness

crisis_management

Since Sterling is struggling just now,  and predicted to weaken further, has anyone any thoughts about investing in other currencies ,  say Swiss Francs? Or is this too unpredictable to be safe?

Albermarle

It is less that Sterling is struggling than the Dollar is strong. Compared to the other two main traded currencies, the Pound is the same as it was 12 months ago against the Euro, and has strengthened against the Yen over the same period.

Trying to second guess future currency movements is a very risky business, even for those whose job it is. 

Or is this too unpredictable to be safe?

Yes.

dunstonh

It is less that Sterling is struggling than the Dollar is strong. 

I was going to say the same word for word.

and predicted to weaken further,

Is it?

has anyone any thoughts about investing in other currencies

If you think Sterling is weak then currency speculating is not for you.

diystarter7

The reason the usa dollar is strong is that they've raised interest rates by a lot more than the fool that leads the uk.
(yes, number 10 does have a hand in interest rates its not just the bank of england)

Section62

diystarter7 said:

(yes, number 10 does have a hand in interest rates its not just the bank of england)

The subject experts disagree with you.

How is the Bank of England independent of the Government?

https://www.bankofengland.co.uk/knowledgebank/how-is-the-bank-of-england-independent-of-the-government

And if there were a grain of truth in your claim then why do you think it would be "number 10" rather than the Treasury pulling the strings?

crisis_management

Thanks, I did think it was more difficult than it looked! I'll stick to trackers , and CGT. 🙂

Ciprico

Assuming your trackers have a large % of US companies and are not hedged... A weak pound and strong dollar isn't necessarily a problem

bd10

Like others already said, currency speculation is not a easy game. Some banks expect GBP/USD to go well below 1.20, but then we have USD strength not seen in decades and this trade may soon be over, just like the Biden trade 2 years back.

You could ask yourself, what is your FX exposure? What's your asset split in GBP, USD, EUR, etc etc. What do you need to hedge? Do you have liabilities in foreign currencies or do you want to hedge your assets in GBP against possible depreciation?

Thankfully capital markets are so well integrated that they oftentimes implicity hedge our currency risks already. Funds buy shares and bonds etc abroad and currency hedging is part of that transaction. If you hold a fund with wide geographic diversity, you have currency diversification already. If in doubt you can always calculate the responsiveness of say weekly fund/stock price returns against currency changes. I ran a regression of all funds/assets against GBP exchange rates and overall beta was +0.02, so, that's not immune from averse FX movements but a 10% depreciation would translate into a 0.2% fall in equity valuation for me . Safe enough for me.

If you hold cash/savings account in GBP, that has full currency risk. You can always take a view and buy a say USD money market fund where the issuer hedges FX. Or there are some short GBP/long USD, CHF etc ETFs out there. Question is, what's the risk/reward. If you convert at current levels, the downside is, GBP might shoot up and you'd regret the hedge.

dunstonh

The reason the usa dollar is strong is that they've raised interest rates by a lot more than the fool that leads the uk.

The British Government doesn't control interest rates.

(yes, number 10 does have a hand in interest rates its not just the bank of england)

No it doesnt.

wmb194

How much money are we talking about? For small amounts it might not be worth the effort anyway.

Albermarle

The reason the usa dollar is strong is that they've raised interest rates by a lot more than the fool that leads the uk.

The dollar is strong because it is traditionally seen as safe haven in difficult times . In global terms the actions of the UK/Boris Johnson, will have minimal effect on global currency flows.