USD hedging

I

irishguy

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I have a large enough holding in US efts (us brokerage) in USD and am looking to contribute more. I'm living in Ireland and will eventually repatriate the funds to Ireland in euro. Should I look at hedging for usd-eur to reduce the currency risk or would it be sufficient to assume investing in a diversified global portfolio would reduce this risk. With there global earnings & market pricing?

If so what's the best least effort way.
 
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I don't think I would worry about hedging, especially as yes, a diversified global portfolio would reduce this risk.
I'm also assuming that you don't have a hard transfer date. So that if a particular year is not good for FX rate , you can delay some or all of the transfer.

There are 3 outcomes (for when you go to transfer if you don't hedge)
Currency moves in your favour.
Currency is roughly where it is now.
Currency moves significantly against you

If the currency moves significantly against you, you still have 2 attractive options
1. Delay some or all of your transfer.
2. Spend some time in the US (or other USD pegged country) and spend your USD there
 
As the dollar is the world reserve currency I expect I'm more likely to gain than lose from the rate in the long term than so I don't hedge.
RichInSpirit said:
I was wondering what sort of a tree USD was when I saw this thread.
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A money tree of course, I assume some Irish politicians may find this thread in future when looking for theirs.
 
It depends on the underlying assets in the ETFs.

For example, if you own a US dollar ETF that is invested in shares in the eurozone, you are effectively, invested in the euro.

If it's a high tech ETF then a very good part of its revenues are coming from non dollar currencies.

So overall, don't bother hedging.

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DazedInPontoon said:
As the dollar is the world reserve currency I expect I'm more likely to gain than lose from the rate in the long term than so I don't hedge.

A money tree of course, I assume some Irish politicians may find this thread in future when looking for theirs.
Click to expand...
It's as likely to fall as it is to rise, if you look at previous performance.
Brendan Burgess said:
It depends on the underlying assets in the ETFs.

For example, if you own a US dollar ETF that is invested in shares in the eurozone, you are effectively, invested in the euro.

If it's a high tech ETF then a very good part of its revenues are coming from non dollar currencies.

So overall, don't bother hedging.

View attachment 9454
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It's mostly in vti. Which has a large investment in global players, so there would be a large enough exposure to Europe in earnings. I'm wondering could I assume if the USD drops sufficiently could I just assume these shares would rise accordingly, it's unlikely the USD would drop hugely just with the Euro and I could assume the mostly likely risk would be a wider USD decline, but a crosponding increase in the shares.
 
irishguy said:
there would be a large enough exposure to Europe in earnings. I'm wondering could I assume if the USD drops sufficiently could I just assume these shares would rise accordingly, it's unlikely the USD would drop hugely just with the Euro and I could assume the mostly likely risk would be a wider USD decline, but a crosponding increase in the shares.
Click to expand...

It won't be exact, but it will work roughly that way.
 
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