Pound increasing in value against the dollar

coyrls

masonic said:

Albermarle said:

masonic said:

aroominyork said:

You could theoretise that when a country is 'doing well' is stock market will rise and its currency will strength, and when a country is 'doing poorly' is stock market will fall and its currency weaken, so unhedged UK investors in overseas markets get a double win or a double whammy when converting back to Sterling, and by hedging you remove the currency factor and your gain or loss is solely determined by the stock market's performance. Maybe, if you are approaching retirement and plan to liquidate and buy an annuity, that is something to consider alongside reducing equity exposure. But generally I think that currency hedging just adds cost which, over years, will add up. 

When you invest in assets - whether that be equities, commodities, gold, etc - their price is determined based on the market's view of their intrinsic value and is not tied to any particular currency. If a currency strengthens or weakens, then that must drive a revaluation sooner or later (aka local currency inflation/disinflation). Adding hedging to real assets is simply currency speculation. If you want pure exposure to your underlying assets, then you would not currency hedge.

Maybe being 50% hedged and 50% not, would not be currency speculation?
More a case of hedging your bets ?

I noticed that at one time HSBC Global Strategy was hedging to the tune of about 30%. I found that a bit of a head-scratcher.

Is that because it was hedging bonds?  That is more common than hedging equities.

masonic

coyrls said:

masonic said:

Albermarle said:

masonic said:

aroominyork said:

You could theoretise that when a country is 'doing well' is stock market will rise and its currency will strength, and when a country is 'doing poorly' is stock market will fall and its currency weaken, so unhedged UK investors in overseas markets get a double win or a double whammy when converting back to Sterling, and by hedging you remove the currency factor and your gain or loss is solely determined by the stock market's performance. Maybe, if you are approaching retirement and plan to liquidate and buy an annuity, that is something to consider alongside reducing equity exposure. But generally I think that currency hedging just adds cost which, over years, will add up. 

When you invest in assets - whether that be equities, commodities, gold, etc - their price is determined based on the market's view of their intrinsic value and is not tied to any particular currency. If a currency strengthens or weakens, then that must drive a revaluation sooner or later (aka local currency inflation/disinflation). Adding hedging to real assets is simply currency speculation. If you want pure exposure to your underlying assets, then you would not currency hedge.

Maybe being 50% hedged and 50% not, would not be currency speculation?
More a case of hedging your bets ?

I noticed that at one time HSBC Global Strategy was hedging to the tune of about 30%. I found that a bit of a head-scratcher.

Is that because it was hedging bonds?  That is more common than hedging equities.

As I recall, it was holding a mixture of hedged and unhedged equity funds. It doesn't usually hedge its bond exposure (as warned by Monevator), and there doesn't seem to be any hedging any more.

adindas

Anx said:

The pound’s increase against the dollar has me slightly concerned as 60% of my investment is in the S&P. Is it worth adopting a strategy to mitigate any losses a rising pound might have? How would someone take advantage of an increasing pound v the dollar.

Currency and Stocks Market are two different things.

The currency movement in a particular foreign stock priced in foreign currency are both ways north or south. IMO unless it is done strategically using a proven method, the method that has been back-tested  it is purely a guessing game. Rather than playing a  pure guessing game for the things that is done regularly, it might be better to just leave the market dictate it.

Benefiting currency movement  strategically have been used by currency traders. This will mean knowledge of using technical analysis and reading the news regularly.

steampowered

Today, £1 is worth $1.26.

Back in 2010, when Labour were in power, it was around $1.5 - $1.6. And that was when the UK was still reeling from the near collapse of its banking system.

The markets really don't like the current drop of Conservatives because they are so  incompetent when it comes to the economy. Talked about reducing the national debt when they got elected but ended up more than doubling it and lost the UK's triple A credit rating along the way. 

Now that the Conservatives are on the verge of getting kicked out, there's a good chance the pound will go up again over the next few years. Assuming that the next government can start getting the country back on track. 

That said you can't predict when currency movements will happen. Equally we don't know whether the US will outperform - the US massively outperformed the rest of the world in this economic cycle but there is no guarantee it will continue to do so. The best thing to do might be to take a global tracker rather than a US tracker.  

Albermarle

Today, £1 is worth $1.26.
Back in 2010, when Labour were in power, it was around $1.5 - $1.6. And that was when the UK was still reeling from the near collapse of its banking system

In the Summer of 2014, it shot up to $1.71, can not remember why though.
Then a slow decline back to about $ 1.47, until the Referendum, when it quickly dropped further. Although it has bounced around a bit, on average it has been hovering around todays rate since then, so for nearly 7 years.
Pound has been even more stable against the Euro following the Referendum drop, trading in quite a tight range for 7 years.

cwep2

There were a lot of posts on this forum after the Truss/Kwarteng budget with people asking how to move their money from Gbp to Usd (when it was around 1.05-1.15) and now there are a few posts concerned the other way around. These are generally the worst times to react: at the extremes. If your money is invested then unless you are close to drawdown I would not be too worried. You are generally have the choice to invest in region specific funds, and to some extent if you still believe the value of say US companies will go up faster than the UK or European ones then there is a decent chance the US Dollar will follow suit. 

Diversification is useful and also think about your expenses - given energy prices are a huge component of both our spending, but the input prices to a lot of our other consumption (food uses a lot of energy to produce/transport so is correlated) - if the Pound weakens then other costs go up, if you own foreign assets you are somewhat hedged, and conversely if the Pound strengthens, your foreign assets may be worth less, but your cost of anything imported will be lower - the UK imports a lot of food and energy.

Millyonare

Yes, the "pound rebound" is a pain. GBP is up about +20% in 8 months, which means unhedged S&P500 investments have plunged -20% in 8 months. Have shifted half of our US investments to hedged funds since Xmas. As Brexit worries fade, it wouldn't be a surprise to see GBP return to the "old" 1.4 or 1.5 range. Personal view. Not investment advice, etc.

t1redmonkey

I think GBP is benefitting at the moment from the debt ceiling squabble in the US, and also general unease about the US banking system.  However I think the upwards trend for GBP does depend a bit on whether we in the UK get our own 'banking crisis' in the coming months, or if our banking system truly is a lot more resilient than the US one.