Hedging euro against AUD

Wilko121

Hi there,

This is a tricky one and I really appreciate any help

As i understand it hypothetically with an option i could control 10k in euros with maybe 2k for maybe six months to a year?
And if the options didn't go my way it would still have value? Albeit deteriorated over time and with the trade going the wrong way?

My case..
currently living in Australia with a reasonable amount of saving.
lets say 10k in AUD and lets say in the next 3-12 months im looking at investing in a property in Euros.
The Euro is currently trading a $1.58 and I have a feeling that may increase devaluing any $->euro transaction.

I was hoping someone could help me figure out the risk to reward here, I have some stock knollege but still very much a novice..

In short,

-What would the cost of controlling each 10k stack of $ be worth over 3/6/12 month time frame?
-How much would this investment be negatively affected should the stocks drop to lets say 20%?

Huge thanks for reading.

markmacken

I wouldn't be in a rush to put anything into EUR. My medium-term projection is that it is going in one direction: down. I'd say that AUD should do better than it over the next couple of years at least.

braddun

you should buy usa dollars

euroboom13

Disagree ,euro will be the currency to be in, not hedge against.

Be very careful with following mainstream opinion on this one.

Euro is the place to be ,especially if your long term plain is European property.

Don't try and be to smart here ,if I were you ,I would be transferring money into a euro currency account every month. The danger is if you hedge one way or the other you are risking your long term goal on a wild gamble. People will advise you wrong, and it will finish any long term goal.

Seriously ignore speculation ,you will get it wrong.
By buying monthly you will be smart in the long run.

Goodluck

For ever odd

Wilko121 wrote: »

The Euro is currently trading a $1.58
.

You may want to have another look at the exchange rate before doing anything.

markmacken

euroboom13 wrote: »

Disagree ,euro will be the currency to be in, not hedge against.

Be very careful with following mainstream opinion on this one.

Euro is the place to be ,especially if your long term plain is European property.

Don't try and be to smart here ,if I were you ,I would be transferring money into a euro currency account every month. The danger is if you hedge one way or the other you are risking your long term goal on a wild gamble. People will advise you wrong, and it will finish any long term goal.

Seriously ignore speculation ,you will get it wrong.
By buying monthly you will be smart in the long run.

Goodluck

I think that the Eurozone will split over the next 5 years. But hey - that's just me :-)

Wilko121

euroboom13 wrote: »

Disagree ,euro will be the currency to be in, not hedge against.

Be very careful with following mainstream opinion on this one.

Euro is the place to be ,especially if your long term plain is European property.

Don't try and be to smart here ,if I were you ,I would be transferring money into a euro currency account every month. The danger is if you hedge one way or the other you are risking your long term goal on a wild gamble. People will advise you wrong, and it will finish any long term goal.

Seriously ignore speculation ,you will get it wrong.
By buying monthly you will be smart in the long run.

Goodluck

Thanks for the follow up man.

So the idea of controlling future options would be that it would be cheaper in AUD, so if I was looking at investing in Euro surely hedging would work out cheaper?

ixus

Fx has been quite volatile lately as everyone scrambles to cheapen their currency. If you're of the opinion that the ECB will perform QE next year, why not wait?

AUS $ is linked to commodity prices which have had a sharp decline in recent months. January will likely see some bottom pickers entering the market.

Why not just transfer to a euro deposit account on a monthly basis when euro looks cheap. Likely best in days leading up to ecb.

euroboom13

Europe population 750m
Australia population 23m

If I was trying to protect my income from currency movements, I would be placing my money in euro`s asap!

I would be of the opinion that recent market movements are in Europe's favour.

Like when Ireland had its own currency, our only plan for growth was devalue, which benefited the few whom currency jumped at the right time but robbed the working man . If things slow up in china ,au$ will have to devalue.

Europe may not even have to do QE ,with all this cheap oil!

1st dalkey dalkey

Hard to know where to go at the moment.
If China contracts further Oz will certainly suffer, but so will most other major economies, including the Euro area.
The Euro area also has additional risks in the Ukraine situation, the Greek situation and threatening deflation.
The US$ seems to be going well at the moment, but it is based on huge debt and it's reserve currency status. There has been some chipping away at that status lately.
In Oz's favour is the fundamental wealth that goes with commodity riches. It may be cyclical and fluctuating, but it remains fundamental. Oil and Gas will rebound, as will iron ore, copper etc.

ixus

Draghi is hell bent on QE.

Europe is a slow paced, social welfare state incapable of fixing its employment or debt issues.

Australia has already acted at government level on commodity prices by cutting the number of state employees last week.

For ever odd

ixus wrote: »

Draghi is hell bent on QE.

/QUOTE]

Since when?

It is the markets that are addicted to QE.

For ever odd

ixus wrote: »

Draghi is hell bent on QE.

/

Since when?

It is the markets that are addicted to QE.

For ever odd

ixus wrote: »

Draghi is hell bent on QE.

Since when?

It is the markets that are addicted to QE.

Worthy of all love

Good savings accounts in Oz are giving 3.5% interest p.a. or more.
Put it aside in a Fixed term a/c for 1 or 2 years and you could get 5% at least.

I'm a novice at all this, but would it be worth looking into how much interest you'd make over the next year by leaving in in AUD
vs
how much interest you'd make in EURs after transfer fees, commission and exchange rate (especially if done monthly)?

Do you plan on staying in oz after you buy Irish property, or will you be moving home?