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What is currency exposure and how is it measured?

Currency exposure describes how much of a portfolio's value depends on each currency — how much would change if the dollar, the yen or the pound moved against the euro. It is measured by the currency of the underlying assets, not by the currency in which a security is bought or quoted. A world equity ETF bought on a German exchange in euros is still, economically, mostly an investment in US dollars.

How it is measured

For each currency cc, the exposure is the share of the portfolio's value invested in assets denominated in that currency, adding up direct holdings and the contents of funds:

wc=∑iVi fi,cVtotalw_c = \frac{\sum_i V_i \, f_{i,c}}{V_{\text{total}}}

where ViV_i is the value of holding ii and fi,cf_{i,c} the share of that holding invested in currency cc. For a currency-hedged fund, the hedged part counts in the investor's own currency.

A simple illustration

A euro investor holds:

HoldingValueCurrency split
MSCI World ETF, listed in euros€40,000about 70% USD, 7% EUR, 23% other
German shares€15,000100% EUR
Cash account€5,000100% EUR
wUSD=40,000×0.7060,000≈46.7%w_{\text{USD}} = \frac{40{,}000 \times 0.70}{60{,}000} \approx 46.7\% wEUR=40,000×0.07+15,000+5,00060,000=38%w_{\text{EUR}} = \frac{40{,}000 \times 0.07 + 15{,}000 + 5{,}000}{60{,}000} = 38\%

The remaining 15.3% is spread over other currencies, mainly the yen, the pound and the Swiss franc. Almost half the portfolio depends on the dollar, although every holding was bought in euros.

Exposure through revenues

A second layer is where companies earn their money. A German car maker that sells much of its output in the US and China reports in euros, but its profits depend on the dollar and the yuan. This economic exposure is harder to measure and usually does not appear in currency breakdowns, which follow the currency in which assets are priced.

How to read it

  • Compare it with a plan. Some investors keep most of their long-term money in their home currency; others are comfortable with the world market's currency mix.
  • A large exposure to one foreign currency means that its moves against the euro can dominate the portfolio's results in some years.
  • Currency-hedged share classes allow the same investments with much less currency exposure.

A worked example

Worked through on a sample portfolio. The figures below are that portfolio’s, not yours.

What is my allocation by currency?

Here's your allocation by currency:

CurrencyValue (EUR)Weight (%)
EUR74.014,85 €53,19%
USD19.749,31 €14,19%
Unclassified17.809,00 €12,80%
Crypto9.037,34 €6,49%
Cash8.000,00 €5,75%
TWD2.288,86 €1,64%
KRW1.737,76 €1,25%
HKD1.715,75 €1,23%
INR1.241,68 €0,89%
CAD427,65 €0,31%
GBP394,90 €0,28%
BRL349,71 €0,25%
ZAR333,01 €0,24%
CNY292,74 €0,21%
SAR249,51 €0,18%
CHF209,25 €0,15%
MXN181,73 €0,13%
AUD132,15 €0,09%
MYR125,74 €0,09%
THB115,92 €0,08%
PLN113,95 €0,08%
AED111,99 €0,08%
IDR89,39 €0,06%
TRY64,84 €0,05%
KWD62,87 €0,05%
CLP58,08 €0,04%
QAR53,05 €0,04%
ILS36,19 €0,03%
PHP34,38 €0,02%
HUF31,43 €0,02%
SEK28,32 €0,02%
COP15,72 €0,01%
CZK10,81 €0,01%
EGP7,86 €0,01%

This table shows how your portfolio value is split across currencies. The breakdown reflects only the coverage currently available (87,20% coverage), so an Unclassified share is included where present.

Related topics

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