Why a rising currency may not mean a profit
Read the quote direction, the dates and the costs before interpreting a gain.
Read the quote
“Up” needs a comparison currency and two dates. A currency may rise against USD while falling against GBP. A chart in someone else’s home currency may not describe your result.
Fees can consume a modest exchange-rate gain. The cash model also leaves out deposit interest, taxes and inflation, so its result is not an after-tax or purchasing-power return.
Leveraged forex contracts and currency funds have additional features and risks. They do not have the same payoff as an unleveraged balance of foreign cash.
A gain after costs?
Hypothetical arithmetic, before tax. The cost examples assume unchanged reference rates unless a currency move is specified.
1.008 × 0.995² − 1 ≈ −0.21%
Try the example
Open this example in the simulator →Loads 10,000 with a 0.5% haircut per exchange and zero fixed fees. The simulator uses actual currency history, so its result will differ from an unchanged-rate example. It models cash, not the return on an asset.
Sources and editorial notes
ASIC Moneysmart · Forex trading. Vanguard explains fund share-class hedging.
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