Buy foreign stocks with local currency vs U.S dollar?
Summary of User’s Issue and Solutions Discussed:
- The user is confused about how buying investments in foreign currency (like JPY) versus USD impacts their gains and the associated currency exchange risks.
- Fidelity’s response highlights the inherent exchange rate risk when trading in different currencies, noting that the currency’s value may drop relative to the USD.
- For more detailed information on international stock trading, Fidelity recommends visiting their stock FAQs page.
- Due to the complexity of the user’s question, Fidelity suggests contacting their International Trading team for personalized assistance.
Here’s the full thread
I’m having a hard understanding how it would affect my gains if I buy in foreign currency vs my normal USD currency, and why one would buy with one or the other.
So if I am using USD and JPY as example:
If i buy in USD, the % gain or unrealized gain I see already includes the potential gains/ loss from the changes of the currency exchange rate between the two currency at that point in time (built in currency exchange risk is reflected)?
Whereas if I buy in yen, the % gain or unrealized gain I see is the gain from the investment only. The actual gain/ loss could be greater/ lower depending on whether the yen got stronger or weaker compared to my initial investment currency exchange rate (currency exchange rate is not reflected)?
and if i expect the yen to strengthen to the dollar, buying in yen would hedge against currency risk at the cost of slightly lower gains? This would mean higher floor and lower ceiling?
Does it matter if, when/if I withdrawal, I’ll be withdrawing in US anyways?
Like let say I buy at the same time and sell at the same time, my actual gain/losses would be the same if i were to buy with Dollars or yen right? Lets say actual investment gains is 10%, but currency gains/losses X%.
If I buy with dollars, the % gain/losses I see on the website would be the 10% + X% or 10%-X% built in already right?
Whereas the yen, the % gain and losses I see on the website would only be the 10%, and I would need to factor in the X% movement on the currency?
Thanks for reaching out to us on Discord.
When it comes to trading in different currencies, there is always the chance of exchange rate risk. This is the risk that the currency in the issuing company’s country will drop relative to the US dollar.
If you wish to learn more about International Stock Trading, please visit the link below:
Stock FAQs: International Stock Trading: https://www.fidelity.com/stock-trading/faqs-international
Due to the complexity of your question, we recommend speaking with our International Trading team by phone. They are available from Monday to Friday, 5:00 a.m. to 7:00 p.m. ET. Make sure to say “international trading” when the system prompts to get routed correctly.
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