Wonder if anyone here might have some guidance for me as I'm a novice around currency hedging and wonder if it might be a smart thing for me to look into or should it be left to the preserve of sophisticated investors
Currently have $500,000 in cash and living in the USA. However this is temporary and I consider my functional long term currency to be Euro and anticipate a return to Ireland in early 2018.
We have remained in dollars in anticipation of its continued strength against the Euro. Most commentators pointing towards EUR/USD parity by mid-2016 - it did indeed briefly touch 1.05 in Dec 2015 (we perhaps should have converted at this point) but as you may have seen the dollar has weakened against the Euro (reaching 1.13) as further FED rate hikes are seen as less likely.
However FX analysts still point towards $ strength against the Euro in the medium term indicating rates of 1.02 - 1.04, even parity as still likely once US / EU central bank policy divergence continues. I fear however that 1.05 of 2015 won't be seen again and we might see a return to historical average of c1.30. Each 1cent move increasing or decreasing my EUR position by c.4000euro - painful!. You could argue that since Dec 2015 to the 1.13 peak last week I "lost" 32,000 in terms of my EUR holdings (move from 1.05 to 1.13). It has since drifted back to 1.09 as of Friday.
Given the current market volatility I'd like to protect myself against the possibility of further dollar depreciation. Locking in a rate of 1.09 (current rate) and creating a scenario where my downside risks are capped going forward but where I can still benefit if EUR/USD changes move in my favor would be great. Effectively insurance for which there will obviously be a premium paid.
Ive seen from previous threads that folks have used spread betting to hedge their sterling exposure. Do you think this could provide a solution for me or would FX options be more appropriate strategy. Any idea of the premium I might pay per month to hedge my exposure - would the cost of hedging be justifiable for the amount I'm talking about?
Currently have $500,000 in cash and living in the USA. However this is temporary and I consider my functional long term currency to be Euro and anticipate a return to Ireland in early 2018.
We have remained in dollars in anticipation of its continued strength against the Euro. Most commentators pointing towards EUR/USD parity by mid-2016 - it did indeed briefly touch 1.05 in Dec 2015 (we perhaps should have converted at this point) but as you may have seen the dollar has weakened against the Euro (reaching 1.13) as further FED rate hikes are seen as less likely.
However FX analysts still point towards $ strength against the Euro in the medium term indicating rates of 1.02 - 1.04, even parity as still likely once US / EU central bank policy divergence continues. I fear however that 1.05 of 2015 won't be seen again and we might see a return to historical average of c1.30. Each 1cent move increasing or decreasing my EUR position by c.4000euro - painful!. You could argue that since Dec 2015 to the 1.13 peak last week I "lost" 32,000 in terms of my EUR holdings (move from 1.05 to 1.13). It has since drifted back to 1.09 as of Friday.
Given the current market volatility I'd like to protect myself against the possibility of further dollar depreciation. Locking in a rate of 1.09 (current rate) and creating a scenario where my downside risks are capped going forward but where I can still benefit if EUR/USD changes move in my favor would be great. Effectively insurance for which there will obviously be a premium paid.
Ive seen from previous threads that folks have used spread betting to hedge their sterling exposure. Do you think this could provide a solution for me or would FX options be more appropriate strategy. Any idea of the premium I might pay per month to hedge my exposure - would the cost of hedging be justifiable for the amount I'm talking about?
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