Connect with us

Global Banking and Finance Review is an online platform offering news, analysis, and opinion on the latest trends, developments, and innovations in the banking and finance industry worldwide. The platform covers a diverse range of topics, including banking, insurance, investment, wealth management, fintech, and regulatory issues. The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website. .




Building upon our recent video post, which detailed Australia’s strong fiscal currency standing, it’s fair to say that all Australian investors with foreign holdings should be looking to protect themselves from any potential foreign-currency risks.

Fluctuations in the value of currencies can directly impact your investments, and these oscillations affect the associated investment risks — sometimes these risks work in your favour, other times they do not. Any international investments are great strengthening mechanisms for your portfolio, but there fluctuating exchange rates that can jeopardise an overall return. If, for example, you’ve expanded into foreign stock, bonds, goods or properties, there are a few potential solutions to downplay any negative effects.

Hedge your bets

Protect Your Finances From Any Potential Foreign-Currency Risks

Protect Your Finances From Any Potential Foreign-Currency Risks

Considering the strength of the Australian dollar, you won’t lose any money if the currency your investment is in falls, but you won’t gain anything if that currency appreciates.

There are two ways to hedging foreign assets could work in your favour: Buy a currency-hedged mutual fund, or invest in an exchange-traded fund. By doing so, you’ve navigated the risk away from your investment and only have to worry about stock market returns.

Always look for high interest rates

By purchasing the currency of a country that has a higher interest rate, or buy owning government bonds, you could enjoy a small return simply by holding certain foreign currency in a bank account. This is made more difficult for Australian citizens as countries like the USA store cash by holding the Australian dollar and making a return.

However, you should note that this kind of strategy does carry a risk. If a national interest rate drops, you can see a loss. But if another country’s rises, you have a potential opportunity to transfer money overseas and enjoy a gain. Protect your money further with a trusted transfer service from an exchange specialist like Travelex.

Invest in the currency market

Demand for foreign stock has a positive effect on the price of international currencies. The foreign exchange market is dedicated to the trade of foreign currencies and there are several ways to invest — all of which present unique opportunities and potential risks.

You can trade currencies direct, setting up your own accounts in the process, or you can look to hire the services of a professional broker. However, currency trading is more suited to those capable of handling any potential losses. In fact, investors looking for exposure to currency investments might be best served acquiring them through exchange-traded funds. Some exchange currency funds are designed to exploit the trend associated with high interest rates and can therefore provide a suitable outcome. However, you do need to factor trading fees and taxes into your budget.

Buy undervalued currency

To identify currencies that have been undervalued, start by looking at a country’s current account deficit; this is the difference between what is imported versus what is exported. If a country has a sizable discrepancy, it could be that the currency has become uncompetitive, which would then suggest that it may be overvalued and will fall.

High inflation in regard to another country can place pressure on currencies and force down competitiveness but again, the world of international currencies is a complex one and not tackled easily.

Global Banking & Finance Review


Why waste money on news and opinions when you can access them for free?

Take advantage of our newsletter subscription and stay informed on the go!

By submitting this form, you are consenting to receive marketing emails from: Global Banking & Finance Review │ Banking │ Finance │ Technology. You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact

Recent Post