Which currency to hold your capital in?

[virmon]

Do you consider which currency to hold your trading capital in as part of your strategy? Some brokers offer accounts in multiple currencies. For example I think FXCM and RefcoFX offer Euro, Yen, Pounds and US Dollars. As I understand it, they also allow one to switch one's capital between accounts easily for the cost of their current bid/ask spread (which sure beats retail bank spreads).

It recently occurred to me that if I held my capital in a US Dollar account and made "x" percent per month from trading but the US Dollar fell a similar amount or more, I would have little or no profit, or a loss, respectively.

This suggests to me that one might want to choose the strongest currency available at a good broker to hold their account in and move it around or hedge it as markets change. It also suggests that one should look for a broker that pays the best interest on one's un-deployed capital.

So which is the strongest currency?

How can one quickly determine this and monitor this?

Which brokers offer which currencies?

What might be some good capital management strategies to determine which account(s) to hold one's trading capital in?

Which brokers pay what amount of interest on monies in your accounts and under what conditions? Some brokers only offer interest with lower margin accounts or offer no interest.

What are your thoughts and experiences with respect to these matters?

I haven't seen any posts on this forum regarding this so if the matter has already been dealt with, please point me to the thread.

 

[N Rothschild]

well the doolah is the strongest currency atm

 

[GammaJammer]

Just hold it in the currency your cost base is in (i.e. if you are a uk resident, and your trading is paying your mortgage, naturally hold sterling balances for preference.

A few years ago, yield on sitting balances was a factor, but not so much any more with global rates where they are.

 

[Tiger21Invest]

I agree and people often overlook this searching for advantageous rates. For example, Austrian banks made large home loans to individuals in Eastern Europe in euros and Swiss francs and now the currencies their loans are denominated in have moved against the local currency meaning the properties are well under-water. With leverage to common and preferred equity at 35 to 1, less than a 3% write off of total assets will wipe out all the equity for Austrian banks. Given that Austrian bank assets are 4x larger than GDP, it will be much harder for the government to bailout the banks as it happened in the US with US bank assets 2x more than US GDP.