Any idea how to hedge GBP.USD with Interactive Brokers (IB) without borrowing USD?

[mickael28]

Hi,

I've got 2 investing accounts in GBP in UK, one with IB and another outside. The one outside just allows you to keep the funds in GBP (although you can invest in US stocks) so I wanted for example to invest 10K GBP in US stocks from the first account (which will just get that amount, convert it to USD and invest in US stocks) and hedge the currency risk of that exposure with IB.

For that, I think I should buy GBP.USD so that if my investment in the US stocks weaken due to GBP.USD going up, then I'll make part of the loss back from the forex GBP.USD purchase.

The issue I noticed today with IB was that even though my account is in GBP, when I purchased GBP.USD what they did was to borrow me the amount in USD, so that now my GBP account has increased rather than being reduced (and they've given me more GBP rather than using the GBP funds that I already had) and I think I'm going to start paying daily interest rates on the loan of ~13K USD that they've borrowed me.

Do you know if there's a way so that all future hedges don't inccur this loan and the GBP.USD purchase is done from my GBP funds instead?

 

[cantagril]

Hi,

I've got 2 investing accounts in GBP in UK, one with IB and another outside. The one outside just allows you to keep the funds in GBP (although you can invest in US stocks) so I wanted for example to invest 10K GBP in US stocks from the first account (which will just get that amount, convert it to USD and invest in US stocks) and hedge the currency risk of that exposure with IB.

For that, I think I should buy GBP.USD so that if my investment in the US stocks weaken due to GBP.USD going up, then I'll make part of the loss back from the forex GBP.USD purchase.

The issue I noticed today with IB was that even though my account is in GBP, when I purchased GBP.USD what they did was to borrow me the amount in USD, so that now my GBP account has increased rather than being reduced (and they've given me more GBP rather than using the GBP funds that I already had) and I think I'm going to start paying daily interest rates on the loan of ~13K USD that they've borrowed me.

Do you know if there's a way so that all future hedges don't inccur this loan and the GBP.USD purchase is done from my GBP funds instead?

I'm in a parallel but not identical situation in that I am based in both GBP and EUR.

I know that this is not what you asked for, but for me, the solution had been to use separate currency accounts; in the past a bit cumbersome but these days very straightforward with the availability of low-cost multi-currency accounts in the UK.

I recently started using Fineco (there are others) who provide both multi-currency banking and trading from a single combined account - including stock and other markets from around the world, the US amongst them. I can now hedge in an easy economic way from within that account which, for me, has made life considerably easier and somewhat more profitable.

 

[mickael28]

I'm in a parallel but not identical situation in that I am based in both GBP and EUR.

I know that this is not what you asked for, but for me, the solution had been to use separate currency accounts; in the past a bit cumbersome but these days very straightforward with the availability of low-cost multi-currency accounts in the UK.

I recently started using Fineco (there are others) who provide both multi-currency banking and trading from a single combined account - including stock and other markets from around the world, the US amongst them. I can now hedge in an easy economic way from within that account which, for me, has made life considerably easier and somewhat more profitable.

The situation is getting more complex now because I'm using one of the accounts supported by the UK government to help with savings and retirment and there, they've got certain rules. One of them being that brokers cannot offer multi-currency accounts in them and all cash has to be always in GBP, hence that buying foreign investments gets a little bit more problematic with them.

Do you have any account in the UK by any chance, and if you do, any of this called ISA accounts?

 

[cantagril]

The situation is getting more complex now because I'm using one of the accounts supported by the UK government to help with savings and retirment and there, they've got certain rules. One of them being that brokers cannot offer multi-currency accounts in them and all cash has to be always in GBP, hence that buying foreign investments gets a little bit more problematic with them.

Do you have any account in the UK by any chance, and if you do, any of this called ISA accounts?

The account I was referring to is in the UK - despite Fineco being part of the Unicredit Group and an Italian bank they have managed to position themselves so that to all intents and purposes (with a few exceptions) the account behaves like an ordinary UK one. I don't think they do ISAs now but they are adding instruments all the time and I have an idea that they're part of the plan.

 

[ironjaw]

I've heard from Fineco that they are introducing ISA this year