Currency Impact Calculator

Welcome to the Currency Impact Calculator. You can use this calculator to see how your return is affected by different movements in exchange rates or the return of the underlying investments.

The calculator makes various assumptions when generating results. Changing the Assumptions will change the results. Click here for more information.

Initial investment value

Price return for the US investment

Current exchange rate (USD/AUD)

Future exchange rate (USD/AUD)

Exchange rate appreciation

AUD depreciates against USD

If the AUD depreciates against the USD by 1.00%, then this will have the effect of increasing your return by 1.01%.

The exchange rate return of 1.01%, combined with the price return of 3.00%, results in the estimated AUD return of 4.04%.

In an unhedged investment, your $10,000 initial investment value would have been $10,404 at the end of the period compared to $10,300 in a hedged investment. In this scenario, an unhedged investment would have outperformed a hedged investment.

To hedge or not to hedge? Next Steps

Price return Vs AUD return

Assumptions

	Rate of return	Dollar value
Price return (hedged)
Exchange rate return
Estimated AUD return (unhedged)

Final investment value (hedged)
Final investment value (unhedged)

Important notes

The information contained within the calculator is intended for general informational purposes only. It is not intended as investment advice. and must not be relied upon as such. The results which you generate when using this calculator are dependent on the variables you input and the assumptions made by the calculator. As the variables and assumptions are unlikely to match your situation precisely, the results will not be reflected accordingly.

The assumptions made by this calculator, and their limitations, are explained in the Assumptions section. We believe the assumptions (leaving aside the ones you input) provide a reasonable general view. As these assumptions will be the same for any calculation, when you change a variable the result will be a reasonable illustration of the impact of that particular variable change.

Please note that this is a scenario analysis only. There may be other factors aside from currency and the US price return that may affect the performance of the investment in Australia. Past performance is not an indicator of future performance.

You should consider the product disclosure statement (PDS) or prospectus for a fund and your personal circumstances, or those of any other relevant person, in order to decide whether a fund is suitable for you or any other person. A PDS for Vanguard funds can be obtained here or by calling 1300 655 101.

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer.

Disclaimer

The calculations are based on assumptions and are GENERAL ILLUSTRATIONS ONLY.

You should refer to the "Assumptions" link to verify that the assumptions reflect your personal situation. The calculations are not intended to constitute or be a substitute for financial product advice given by a licensed financial adviser. They do not make any allowance for fees, costs or taxes. Past performance is not an indicator of future performance.

NOTE: All references in this page to "Vanguard" are to Vanguard Investments Australia Ltd ABN 72 072 881 086 AFSL 227263.

Vanguard and its related companies specifically disclaim any liability (whether based in contract, tort, strict liability or otherwise) for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with the access to or use of this calculator.

Other than as required under consumer protection law, under no circumstances will Vanguard and its related companies be liable for any loss or damage caused by a user's reliance on information obtained by using this calculator.

You should not make any decisions on the information contained herein without first consulting with your licensed financial adviser.

This calculator is not intended to be relied on for the purposes of making a decision in relation to a financial product, including a decision in relation to a particular superannuation fund or strategy. You should consider obtaining advice from an AFS licensee before making any financial decisions.

GENERAL ADVICE WARNING

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients' circumstances into account when preparing our website content so it may not be applicable to the particular situation you are considering. You should consider yours and your clients' circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This website was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

Important Legal Notice - Offer not to persons outside Australia

The PDS or Prospectus does not constitute an offer or invitation in any jurisdiction other than in Australia. Applications from outside Australia will not be accepted through the PDS. For the avoidance of doubt, these products are not intended to be sold to US Persons as defined under Regulation S of the US federal securities laws.

Why is currency hedging ?

Fluctuation in the value of the Australian dollar and foreign currencies can affect returns of international investments. This is because losses and gains must be converted back into Australian dollars. A falling dollar increases the value of investments held in international assets and vice versa.

Where a fund offers both hedged and unhedged options, the unhedged version will outperform its hedged counterpart if the Australian dollar falls in value. While in the long term returns on a hedged or unhedged basis are expected to be broadly similar in the short term, return differences can be substantial. All investors need to be fully aware of the risks.

To hedge or not to hedge

Currency hedging will suit investors seeking an international investment without the impact of currency. Essentially hedging reduces volatility of returns by removing the impact of currency movements on international investments.

While unhedged options do expose your portfolio to currency fluctuations, this exposure can also provide an additional source of portfolio diversification. Currency hedging does come at a modest cost. Currency risk and the role of hedging should be considered as part of an international investment strategy, ensuring consistency over time.

Why indexing?

An index fund aims to achieve market returns by holding a broad spread of securities to track the overall performance of an index before fees, expenses and taxes. Index funds combine diversification with low costs. Historically, the returns of index funds have been competitive in the long term, relative to the returns of active managers. However, past performance is not an indicator of future performance and investments are not guaranteed and may rise or fall in value.

Why has indexing become such a popular investment strategy?

Diversification: The broad spread of securities in an index means less exposure to the performance fluctuations of individual shares and securities. The overall effect is to moderate volatility and smooth out returns over time.
Low costs: Indexing has a cost advantage due to low management fees and low transaction costs.
Tax efficient: Indexing's "buy and hold" approach makes the most of capital gains tax concessions.
Reduced risk: Index funds simplify the investment process by closely tracking market returns instead of relying on someone's opinion about "picking the market".

What about returns?

Indexing aims to deliver competitive long-term investment returns at low cost. Index funds do not incur the same level of costs associated with research and analysis compared to actively managed funds. And index funds tend to have lower levels of portfolio turnover, which results in lower fees and the potential for favourable capital gains tax outcomes.

Note again that past performance is not an indication of future performance. Our products are designed to closely track market returns before fees, expenses and taxes and increments are not guaranteed and may rise or fall in value.

Assumptions

Calculation basis

In calculating the AUD return, only the US price return and the exchange rate movements have been considered. Other factors such as:

Fees;
Transaction costs; and
Buy-sell spreads.

may affect the return, but have not been included in the calculation.

In comparing a hedged and unhedged investment, the selected return in USD (hedged) is compared against the calculated return in AUD (unhedged). Other factors such as hedging costs have been ignored.

The tax implications of the transaction on your personal situation have not been considered.

Important Notes

The information contained within the calculator is intended for general informational purposes only. It is not intended as investment advice and must not be relied upon as such. The results which you generate when using this calculator are dependent on the variables you input and the assumptions made by the calculator. As the variables and assumptions are unlikely to match your situation precisely, the results will not be reflected accordingly.

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer.

Disclaimer

The calculations are based on assumptions and are GENERAL ILLUSTRATIONS ONLY.

NOTE: All references in this page to "Vanguard" are to Vanguard Investments Australia Ltd ABN 72 072 881 086 AFSL 227263.

You should not make any decisions on the information contained herein without first consulting with your licensed financial adviser.

Important Notes

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer.