Currency and exchange
 

If you have not activated a foreign currency account with your broker,  they will automatically carry out a currency exchange if you invest in a stock/instrument that is traded in another currency than the one you use.  In the vast majority of cases, there will be a surcharge in the exchange rate at the broker for such trades. This is something you should be aware of if you trade stocks in foreign exchanges and currencies.

It is important to be aware that this also happens if you trade equity funds, ETFs, etc. Some brokers also make an automatic exchange when you trade funds, regardless of whether you have a currency account or not.

Currency account

There is an alternative. Most brokers have something called a currency account. This is an account you can use if you want to be able to buy and sell shares in the relevant currency in which they are traded, and take the exchange yourself when it suits and is desired.  All transactions/trades are then executed in the currency that you have in your account and in which the relevant stock/fund is traded. You also pay the brokerage in the currency of the security. You must manually make exchanges to have enough currency in the account to do trades in the relevant instruments you want.

Whether you want to go for a currency account or not, is something you should check out with the relevant broker you use. If there is a lot of trading and trading in foreign currencies, this can quickly be a good alternative.

Account changes in account

This is another thing you should know about as an investor of foreign securities. You will see a change in the value of your stocks/funds equal to the change in the currency in which these securities are traded.

A stronger dollar will reduce your value in foreign securities traded in foreign currencies. A weaker dollar will increase the value accordingly. You are thus exposed to currency risk as an investor of foreign securities.

 

An example might be a correction in the market, as in March 2020. Here, the value of the Norwegian Petroleum Fund rose even though all the global markets fell sharply. The reason was that the Norwegian krone (KR) depreciated dramatically against the US dollar (USD). The Petroleum Fund held large positions in securities traded in dollars, which in turn led to an increase in the total value of the fund.

 

The same can happen to your portfolio and can cause fluctuations in your total value if you hold shares and funds that are traded in foreign currencies.  This is why in some cases you can see that, for example, the total value of your stock has increased or decreased by a few percent without the underlying instrument/stock haven't changed price since the last time you checked.

currency and exchange currency investment stocks exchange currency and exchange exchange currency