What will the USD to GBP peak exchange rate be from now (Jul14) to the end of 2022?
0.87
expected
Dec 31
M$0 bet
jack
I'm curious what's the reason you keep and invest it in USD? If I were in your position, I would probably try to minimize my exchange rate risk by keeping most of my investments in local currency. I think the risk coming from exposure to foreign currency is less well compensated than the risk coming from exposure to the stock market - currencies are zero-sum (one goes up, the other goes down), whereas the stock market is positive-sum (it grows a lot over time). So, I would probably convert to local currency as soon as I'm paid (if convenient). But your situation may be different, e.g. if you expect you may move in the future and therefore pay expenses in a different currency.
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jack
Basically, I'm a strong believer in not trying to time the market in general. There are strong results that say that if you know what your target allocation of investments is, the right time to get to that target allocation is now (if we ignore tax consequences and transaction costs); and the same should be true of currencies.
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DavidChee
@jack You make a valid points but for me I don't think they make as much sense. Firstly I travel a lot and don't particularly intend to live in the UK long term so it doesn't make sense to convert to GBP to only have to convert again to the currency of whatever country I may live in. Secondly, for crypto investments it makes sense to buy with USD and then when I sell I buy whatever currency I want, once again minimising how many times I have to convert. Finally, maybe not as compelling a reason, but it is nice to invest using dollars when investing in US stocks. Just because when reading news, looking at other people's analysis, doing due diligence, all the numbers are in USD.
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DavidChee
@jack I'm not sure that I really intend to time the market and thus far I have just been converting some of it as it comes. But the USD has been strongly up trending vs GBP and it is interesting to see how much more sterling I could have got if I waited a few months.
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jack
@DavidChee Those all seem like good reasons to keep USD, interesting to hear. In my view, that would suggest that a reasonable strategy would be to generally hold enough GBP for your next N months of expenses, or something like that. But yeah, I do think it's an interesting question, and it is plausible to me that you could forecast changes in exchange rate that are not currently priced in for various reasons.
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