How do you manage foreign currency exposure?

It is important to understand the exchange rates and their historical levels. Without it you may end up converting at all time lows or missing an opportunity to convert when rates are in your favor. But never ever use fx earnings as a way to earn extra income it often goes wrong.! Focus on your main business and any gains you make are a bonus. Think of talking to a professional about risk management strategy.!

One thing most people fail to realise is that they should make their long-term investments in the currency/country they are most likely to retire at, in order to mitigate forex fluctuations while redeeming investments at a later time. Although the expected return from investments in the country in which you earn v. the home country/ country you intend to retire should be the primary decision making factor (i.e. one should invest in the country expected to give higher returns on investments).

Also.. it requires that we have a short-term plan for the expected expenses or financial obligations and the corresponding expected income, which helps us to arrange our vision correctly. There is also knowledge of predicting the direction and development of currencies that helps us know what currencies we will keep.

Consider hedging your investments by putting your money into overseas assets with hedged options. For everyday investors, an uncomplicated way to do this is by investing in hedged exchange-traded funds (ETFs). These ETFs are accessible for various underlying assets traded in major markets. But then again having exposure to foreign currency can also work in your favour and could be a good investment diversifier!

It is good to have two accounts in the bank, one of which is flexible for usual transactions such as the current account, and another in which we keep what is surplus to our needs in the short term, in order to achieve an additional return on our income. We stress here the necessity of knowing what is the minimum amount that must be present in the account, which corresponds to not collecting annual fees to open the account, which is a very important matter.

In ISL, raw material was imported from Japan in USD and we had to pay in Pakistani Rupees. To reduce the adverse impact of FX rate movement, we used to make advance payment under LC up to 70% - 80% before the shipment. This strategy proved to be remarkable in terms of mitigating huge exchange losses.

Beyond tax, if you have assets in multiple jurisdictions, it is also advisable to execute separate Wills for assets in each of these jurisdictions to ensure seamless transition of your wealth to your family members.

Fluctuations in currencies have become greater than before, and attempts to hedge this, whether by monitoring spending and income or following developments in currency prices, is important, but I do not consider it the entire solution. We must invest a portion of our income, no more than 10% of our income, in what is called safe investment through investment funds affiliated with various banks or entering stock exchanges, but with sufficient experience, which helps to create a greater state of balance in our income. And protect it from economic fluctuations, especially currency exchange rates.