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Discussion Starter #1
Good morning,

I will be moving to Canada sometime near the end of the year and all my currency at the moment is GBP. In the past year I've seen a decline in the exchange rate from 2.1 to the current rate floating around 1.50 which has made me slightly sick.

I like ForEx and follow the market occasionally and was relitively convinced when the currency hit 1.7 it would rebound to about 1.85, but through more weakness of the pound and the recovery of Canada and natural resources the pound is just getting weaker. Also there is a current election in England which isn't helping the currency at all.

I would like for advice on what to do about this issue, do you think I should wait for it to recover to about 1.7 or so, hedge my bet with put options or just transfer it into a dividend paying stable stock?

Thanks for your input.
 

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I started a very similar thread a few days ago. I'm interested in how you would implement a hedging strategy. Have you thought through the steps required and, if yes, would you be willing to share?
 

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I'm not 100% sure if I would be able to do this due to me not having that much in the way of funds, but through Brokers you can use derivitive put options.

Bare in mind I'm no expert, and this knowledge is pretty limited from my own research so if I'm incorrect, please feel free to point it out.

There is two levels of hedging I'm aware of;

1) You enter a contract where you say I want my currency at 1.500. If the currency increases in value, you still only get 1.500. But if it decreases, you will still get 1.500 profiting and locking your price.

2) You purchase a put contract which says if your price goes below 1.500 you are sitll given this price on your exchange, but if it goes up you keep the profits. Downside; premium on put contract.

Side note: This is obviously relitively useless now, as you don't want to lock your price at 1.500, but it could protect you from losing more.

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Second way of hedging; Whilst the GBP is weak put your currency into an unrelated strong currency, for example the CHF, JPY or AUS which is likely to gain against either the pound or your wanted currency. This way you are not exposed to the GBP weakness and could profit.

Downside; you really need to know what you are doing when it comes to ForEx (which I don't) and understand the countries economy which you are choosing to heage with.
 

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OK, no one I know has actually done this. I'm at the same level of knowledge: good theoretical understanding of how it could be done, no actual experience in implementing it. ;)
 

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This is what gold is for. Gold continues to make new all-time-highs the past few days in weaker currencies. I'm willing to be that includes the GBP. However, if you're going only looking to hedge for the short-term before converting everything to $CDN then puts are a cheap way to go.

I'd advise against hedging a currency with another. Many countries have pretty much agreed to solve the world's financial woes by way of currency devaluation.
 
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