Investments in a foreign currency

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  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
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    Linton wrote: »
    If the $ rises againt the Euro which rises against the £ the $ must rise even more against the £. For example

    Day 1) £100=$150=Euro 120 therefore 1 Euro=$150/120 Euro=$1.25

    Day 2) £100=$121=Euro 110 therefore 1 Euro=$121/110=$1.1


    Currency values always change between themselves such that if you switch £->Euro->$->£ you end up extremely close to what you started with, minus charges.


    Thanks , so in the OPs hypothetical case case (since they omitted it was two entirely different scenarios) the extra loss they'd make buying the same ETF denominated in Euros instead of £ would simply be the currency losses converting their £ to € to buy and back again after sale. Which would likely be quite significant, several percent each way.
  • Linton
    Linton Posts: 17,160 Forumite
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    AnotherJoe wrote: »
    Thanks , so in the OPs hypothetical case case (since they omitted it was two entirely different scenarios) the extra loss they'd make buying the same ETF denominated in Euros instead of £ would simply be the currency losses converting their £ to € to buy and back again after sale. Which would likely be quite significant, several percent each way.


    If the OP keeps his money in £s and the ETF buys and sells in Euros and invests in Euro based companies there must be some currency conversion somewhere. Presumably the ETF fund manager is holding and trading foreign currencies anyway so conversion costs should be minimal, certainly much less than you are charged by your travel agent.
  • poppy10_2
    poppy10_2 Posts: 6,575 Forumite
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    AnotherJoe wrote: »
    Thanks , so in the OPs hypothetical case case (since they omitted it was two entirely different scenarios) the extra loss they'd make buying the same ETF denominated in Euros instead of £ would simply be the currency losses converting their £ to € to buy and back again after sale. Which would likely be quite significant, several percent each way.
    Even the overpriced Hargreaves Lansdown only charge a maximum of 1% for buying foreign ETFs/shares - lower for larger purchases
    poppy10
  • stphnstevey
    stphnstevey Posts: 3,224 Forumite
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    In simple terms, £ goes down in value, cheaper to buy $ assets but less return if looking to sell $ assets for £s?

    And vice versa if £ goes up?
  • londoninvestor
    londoninvestor Posts: 1,350 Forumite
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    stphnstevey wrote: »
    In simple terms, £ goes down in value, cheaper to buy $ assets but less return if looking to sell $ assets for £s?

    And vice versa if £ goes up?

    The other way round. If the pound goes down against the dollar, then your £ buys less. So $ investments are more expensive from a buyer's perspective, which is to say more valuable from a seller's perspective.

    Vice versa if the pound rises against the dollar.
  • stphnstevey
    stphnstevey Posts: 3,224 Forumite
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    londoninvestor wrote: »
    The other way round. If the pound goes down against the dollar, then your £ buys less. So $ investments are more expensive from a buyer's perspective, which is to say more valuable from a seller's perspective.

    Vice versa if the pound rises against the dollar.

    That makes more sense lol!
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