FX Gains and losses on investement in FX contracts

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David M
David M Member Posts: 95 ✭✭
edited August 2020 in Personal Plus and Home & Business
Using Personal Plus 2019, I am about to invest in Foreign Exchange Contracts to sell USD and buy AUD to hedge my USD share portfolio, as the AUD is forecast to appreciate against the USD.
How do i record these transactions, that will allow me to see the daily change in the value of the US Dollars I have 'sold'??

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  • David M
    David M Member Posts: 95 ✭✭
    edited July 2020
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    Hi Albert
    I am an inveterate optimist, and think there is a solution to every problem , because that is what we are on this earth to do - solve each of those challenges. 
    That aside, lets think about what you have said.
    We do not have to worry about not talking the correct exchange rate, because you can lock in an exchange rate for every transaction.
    So if we have two notional bank accounts, one in USD and one in AUD. We buy USD 10,000 and pay the AUD 14,500 out of the AUD account, locking in the original exchange rate, and offsetting the asset in the USD Account. 
    Each day Quicken will revalue the USD 10,000 into AUD on the rate of the day, providing the daily gain / loss.
    That appears to work - do you want to check?
    If it does, how do we label the two accounts so that they appear next to each other, and part of the same total in the Portfolio report?
    Appreciate your help so far.
    David

  • David M
    David M Member Posts: 95 ✭✭
    edited July 2020
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    Hi Diver Dave

    Your and Albert's suggestion provides an indication and / or tracking of the movement in the exchange rate.  And that works.
    However, if I am to invest $10,000 or $100,000 in a Foreign Exchange contrast, I am interested in both the 'watch-list' view of daily / weekly movements, and the 'portfolio' view of changing $ value of my gains and losses. 
    The $1 investment model provides only the 'watch-list' view as I have tried to implement it.
    Further thoughts anyone?
    Stay healthy
  • David M
    David M Member Posts: 95 ✭✭
    edited July 2020
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    A AAAAHHHHHAAAAAAAAAAAA moment.
    What may not have been clear, is that with a say USD 100,000 Foreign Exchange contract there is no capital invested So if you measure it in AUD from day to day, you will report an asset of about AUD 140,000. This does not actually exist.
    So how to show the matching liability that is fixed in AUD terms was the question I am now trying to answer.
    With that liability fixed, and the USD amount fluctuating with the exchange rate, I hope I will see the economic effect of the hedge from day to day.
    That is my goal.

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