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How to hedge against currency risk?

  • 01-04-2021 8:04pm
    #1
    One More Toy
    Registered Users Posts: 3,761 ✭✭✭


    Hello

    I am going to receive a large-ish cheque in JPY Yen sometime next year

    Say for arguments sake it's 1 million yen

    I'd like to lock in the current exchange rate, what's the best way to do this? A cfd?

    TIA
    Omt


Comments

  • #2
    phantom_lord
    Registered Users Posts: 10,894 ✭✭✭✭phantom_lord


    1m in yen, or 1m yen. not worth it for the latter.


  • #3
    One More Toy
    Registered Users Posts: 3,761 ✭✭✭One More Toy


    phantom_lord wrote: »
    1m in yen, or 1m yen. not worth it for the latter.

    1m yen roughly, fair enough


  • #4
    AlkalineAcid
    Registered Users Posts: 281 ✭✭AlkalineAcid


    I think you can short sell yen for euro today and repay your negative yen balance when you receive the yen. With IBKR you'll pay interest around 1.5% per year to borrow the yen which might be worth it your needs.


  • #5
    phantom_lord
    Registered Users Posts: 10,894 ✭✭✭✭phantom_lord


    AlkalineAcid wrote: »
    I think you can short sell yen for euro today and repay your negative yen balance when you receive the yen. With IBKR you'll pay interest around 1.5% per year to borrow the yen which might be worth it your needs.

    and $10 a month in account fees. Plus the commissions of the trade.

    There's a good chance that hedging will cost more than the potential fx risk.


  • #6
    AlkalineAcid
    Registered Users Posts: 281 ✭✭AlkalineAcid


    phantom_lord wrote: »
    and $10 a month in account fees. Plus the commissions of the trade.

    There's a good chance that hedging will cost more than the potential fx risk.

    The commission is only approx $2 but you're right, the monthly account fees will make the hedging a lot more expensive if OP doesn't already have an account.


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  • #7
    One More Toy
    Registered Users Posts: 3,761 ✭✭✭One More Toy


    Not currently with IB, happy enough with Degiro for now

    Would a cfd work? Short the Yen?


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