Getting paid in USD

[d000hg]

What are you doing on a UK forum asking questions?

[aussielong]

What are you doing on a UK forum asking questions?

Sometimes you get some educated answers. People in the UK sometimes work abroad too.

[Jog On]

I can think of worse currencies to be getting paid in right now. All this EUR stuff and the Korean 'sabre rattling' etc is pushing the USD up value wise. Interest wise you could convert some into AUD - or hold some carry trades AUD is looking at bit bearish at the mo, although in the long term I think it's still getting stronger and has a very good interest rate.

Do what your username says and go Aussie long!

[d000hg]

Sometimes you get some educated answers. People in the UK sometimes work abroad too.

Working abroad isn't the same as living abroad though, who knows what the rules are... and you don't list your location or mention it in your post. Maybe Oz, or maybe that's just a nickname or where you were born... too many things to guess at.

[HairyArsedBloke]

I forgot you are not in the UK.

In my case I charge in USD and have a USD account in <<offshore tax haven with US & UK compatible banking laws>>; my fee's are wired there without problem.

Charging septics AUD would be nice, but I don't give you merde chance of getting them to do it.

I don't know about Aussie banks, but I suspect that the would be able to advise you on how to accept USD. I presume that you'll invoice monthly/weekly - send you punters an invoice with wire instructions to your AUD account - your bank will do the conversion from USD to AUD. Most spetics should be able to understand how to do their bit; wire transfers are dead easy.

[Freamon]

How am I hedged if I do that? To hedge my FX risk i'd have to lock in a rate with a forward contract or something like that.

If I do as you say, i've just got half the dollar exposure don't I? If the dollar tanks, I won't necessarily offset my loss by what i've got in GBP.

Not sure I want to hedge my FX risk because surely the dollar must strengthen eventually and I don't need the cash for a few years. I'd want to get rid of inflation risk I suppose.

Sorry if I misunderstood you.

I'm assuming you are planning to convert it all into GBP eventually. By converting half now and half later, you are "splitting the difference" in whatever FX losses (or gains) you might have made by holding it all in dollars until you want to spend the GBP, or converting it all into GBP now. As you say, this is not the same thing as locking in today's rate (if you want to do that, you could just convert it all now, but you might have got a better rate if you had waited...)

For example, if you have $10k to convert overall and the exchange rate today is $2, and by the time you need to spend it all, it falls to $1.50.

By converting it all now, you get £5000.

By converting it all the future point of spending, you get £6666.

But there is of course a risk that the exchange rate could move against you in this period. If it moves the other way, to $3, you would only get £3333.

You are, in effect, exposed to a potential £3,333 loss (the difference between the best and worst outcomes).

Assume the rate today is $2 and you guess there's a roughly equal risk of it moving up to $3 or down to $1.50. You don't know which way it is going to move, but you want to balance the risks of losing or winning over the period. You want to get the average exchange rate between now and the point of spending.

So the way to do this is to convert half now, locking in £2,500. Then convert the rest at the end, getting an additional £3,333 or £1,666, for a total of either £5,833 or £4,166. You've halved your exposure from £3,333 down to £1,666.