Post New

https://www.hsbc.com.hk/content/dam/hsbc/hk/vam/pd...

Foreign currency "rates" are simply ratios between the relative value of the pair. Their movement affects both the profitability of trade and the value of the business companies do when translated into your target currency. Some people believe that gold represents the absolute value and fiat currencies should be measured against its value (but then some people believe the earth is flat, believe in the tooth fairy and that Santa Clause is getting his beauty rest after a hard night of travel by sled and chimney).

Summary
EUR: EUR-USD is expected to rise steadily, driven mainly by external factors, while
fiscal policy across the Eurozone is likely to become moderately supportive.

GBP: The GBP may rise against the USD in the short term but is likely to
underperform other G10 peers.

JPY: USD-JPY is likely to correct lower over the near term before potentially drifting
modestly higher, with Japan’s ongoing fiscal challenges being a key risk.

CHF: The CHF seems vulnerable if Switzerland’s exports slow, current account stalls
or global growth and rate differentials rise.

AUD: The AUD is likely to strengthen further, supported by favourable risk conditions
and robust domestic factors.

NZD: The NZD could recover from the pronounced weakness in 2H25 in 2026,
supported by potential for tighter monetary policy and a stabilising economy.

CAD: USD-CAD is likely to move largely sideways in 2026, but uncertainty
surrounding a potential review of the United States–Mexico–Canada Agreement
(USMCA) may introduce some downside risk for the CAD.

RMB (CNY): The RMB is expected to appreciate gradually in 2026, supported by
domestic priorities and favourable cross-border flows.

SGD: The stable, low-yielding SGD is expected to remain a preferred funding
currency in 2026.

INR: The INR could have a tactical recovery in 1Q, but this strength may not persist
throughout the remainder of 2026.

MYR: We call for cautious optimism for the MYR, as Malaysia’s basic balance may
deteriorate due to procurement and ODI obligations stemming from the US-Malaysia
trade agreement.

Key upcoming rate announcements
Date Central bank
28 January The Bank of Canada
30 January (3am HKT) The Federal Reserve
3 February The Reserve Bank of Australia
5 February The Bank of England
5 February The European Central Bank
6 February The Reserve Bank of India

Jeff

EUR-USD is expected to rise steadily...
The GBP may rise against the USD...

There seems to be near universal consensus that the trade weighted US dollar will fall in 2026. There are lots of good reasons that it make a lot of sense, and I believe the reasoning.

The only thing is, I am always suspicious of a consensus that universal. Surely some of those people have money to wager on the effect, and have already placed those wagers, so some of the move is already baked in? So I will boldly predict that the US dollar *won't* drop meaningfully in 2026 for nothing other than contrarian reasoning.

I think the word to watch out for in 2026 (perhaps into 2027) is inflation. I think there is a big risk of a lot of it in the next several years, a big resurgence, perhaps lasting longer than the recent spike. It seems to me that a lot of politicians have painted themselves into a corner, and the only door in that corner is "inflate away the problem". And of course there are few things that make people hate their leaders more than inflation, so we'll see a lot of that hatred, which should wipe out most of the remaining sane/centrist politicians and their parties.

Jim

The challenge when considering "inflation" when evaluating relative currency valuations is how universal the rate of inflation will be for the currencies involved and whether that inflation is a domestic variable or, if it implies a shift in relative currency valuations, by how much.

Jeff

are there some euro based bonds that can be bought in the US?

Acording to ChatGPT:

European Bonds via U.S. Brokerages (most common)
Who offers them

Major U.S. brokerages with international bond desks, including:

Fidelity

Charles Schwab

J.P. Morgan

Merrill / Bank of America

Interactive Brokers

What you can buy

European sovereign bonds (Germany, France, UK, Italy, etc.)

European supranational bonds

European investment-grade corporate bonds

Typically available as:

USD-denominated issues, or

Euro-denominated bonds held in a U.S. brokerage account

Minimums are often $10,000–$25,000 per bond.

3. Supranational European Issuers (most accessible & clean)

These are very common in U.S. portfolios and often overlooked.

Examples

European Investment Bank (EIB)

European Bank for Reconstruction and Development (EBRD)

Council of Europe Development Bank

European Union (NextGenerationEU bonds)

Why they matter

Often AAA-rated

Frequently issued in USD

Traded and settled in the U.S.

No foreign tax withholding

These are among the easiest European bonds for U.S. investors to own directly.

4. European Bonds via ETFs and Mutual Funds (easiest)
ETFs (very common)

iShares

Vanguard

SPDR

PIMCO

Examples (illustrative categories):

Eurozone government bond ETFs

European investment-grade corporate bond ETFs

European inflation-linked bond ETFs

Advantages:

Daily liquidity

Small minimums

Professional currency management (in some funds)

Disadvantages:

No maturity date

Ongoing expense ratios

5. ADR-like Bond Structures (notes issued in the U.S.)

Some European issuers sell:

SEC-registered bonds

Issued under Rule 144A / Reg S

Cleared through DTC

Fully U.S.-custodied

These behave like U.S. bonds even though the issuer is European.

6. Currency considerations (critical)

You can choose between:

USD-denominated European bonds

No FX risk

Simpler tax reporting

Slightly lower yields

Euro-denominated bonds

FX exposure (positive or negative)

Higher yield potential

Currency volatility dominates returns

This choice often matters more than the issuer.

Jeff

The challenge when considering "inflation" when evaluating relative currency valuations is how universal the rate of inflation will be for the currencies involved and whether that inflation is a domestic variable or, if it implies a shift in relative currency valuations, by how much.
...
are there some euro based bonds that can be bought in the US?

FWIW, for those who think there might be an inflation surprise in one or more countries, and/or a big unpredictable move in exchange rates, but DON'T think the US financial system will collapse or be unreliable, the single safest security to own is the US-listed ETF "WIP". It is a basket of inflation protected bonds issued by a wide variety of countries, so no single burst of inflation or currency collapse matters much. To whatever extent you like the reliability of the US dollar, mix in some TIP, which is a basked of US TIPS, US government inflation protected bonds with the only appreciable risks being currency, and potential fudging of inflation metrics.

As with any portfolio of inflation protected bonds, coupons and prices tend to do the reverse things when there is a shift in regime from high to low inflation expectations and vice versa. WIP has had high coupons for a while, but they are falling steadily, while the price return is doing more of the lifting lately in terms of holding purchasing power value. So a chart is a bit misleading at first glance for two reasons: first, it's critical to consider the coupons, and it's important to realize that it's quoted in US dollars so price moves in dollars are the reverse of what the US dollar is doing. The US dollar sank a lot in Q2 2025, so the price of WIP soared measured in US dollars, but in fact it was just holding its value fairly steady in terms of general purpose purchasing power. Overall the US dollar is roughly unchanged in the last 10 years, and WIP has had a positive real return of about 1.9%/year after fees whether measured in US dollars or a basket of others, which is pretty good considering that it's close to being the safest "one click" asset for wealth preservation.

The disadvantage of WIP is that, for non-US persons, there is a 30% US dividend withholding tax, even though the underlying securities are not US source and not subject to withholding tax in their country of issue. You'd do a lot better buying the individual inflation projected bonds, but that's extremely difficult to do. And of course WIP is listed in the US, so it is subject to sponsor and jurisdiction risk, and has fees.

FWIW, just as an example I own some WIP, bought at $31.36 at the start of August. Since then there have been distributions of 0.807 (they are monthly and I missed August's ex-date), net for me after tax of $0.565, so my current breakeven in US dollars is $37.796. Current price is US$39.31, so I'm up 4.0% measured in US dollars. The trade weighted US dollar is down about 1.53% in value in that time, so in real "global purchasing power" terms I'm up about 2.5% in five months. That is better than I'd have done in T-bills, and I've had no dollar exposure risk on the position.

Jim

Thanks for all the recommendations. High market valuation, inflation, and depreciation of US dollars to other major currencies are real risks now. WIP, emerging markets, or even gold (still not convinced) could be reasonable alternatives.

Thanks for pointing out WIP. I have been negligent in my efforts to always keep some investments in the currencies in which I spend, and I suffered some sticker shock at how much the USD dropped just before our annual trip to Europe. After a fair bit of travel in the US and seven weeks in Europe, my unscientific anecdotal opinion is that even at the current exchange rates, nice places in the south of France and Greece are bargains compared to the prices in mountain towns of the western USA. WIP was just what I was looking for to diversify.

the single safest security to own is the US-listed ETF "WIP".

It may be safe, but it doesn't provide much return at all. If I am reading the stats correctly, it looks like over the last ~16 years (since 2008/9), it has returned about 1% annually. That's pretty low, especially when considering that it has a 0.5% expense ratio!

It may be safe, but it doesn't provide much return at all. If I am reading the stats correctly, it looks like over the last ~16 years (since 2008/9), it has returned about 1% annually. That's pretty low, especially when considering that it has a 0.5% expense ratio!

Sure. My having suggested it is predicated on the notion of preservation of purchasing power in the face of sundry currency risks, not a great return.

Since inception in March 2008 it has returned 1.01%/year in USD. But the USD was quite low when it started, and has risen 1.76%/year since then despite the dire 2025. So the total return in "global purchasing power" has been 2.77%/year after fees.

Most people lose money on hedges and attempts to find safety, so I figure any positive return at all is not really that bad all things considered.

Especially when you factor in how many of those intervening years had substantially negative interest rates for so many countries' government bonds. They're not so bad now. Current average YTM and YTW are both stated at 6.56%. It's not a great number to consider, but FWIW the trailing twelve month cash distributions amount to 5.53% of the current price, before tax. Rather surprisingly for an ETF, it's currently trading at a 10% discount to NAV, and has been at a discount most of the last couple of months. I guess the arbitrage is difficult for the authorized participants.

Jim

"Especially when you factor in how many of those intervening years had substantially negative interest rates for so many countries' government bonds. They're not so bad now. Current average YTM and YTW are both stated at 6.56%. It's not a great number to consider, but FWIW the trailing twelve month cash distributions amount to 5.53% of the current price, before tax. Rather surprisingly for an ETF, it's currently trading at a 10% discount to NAV, and has been at a discount most of the last couple of months. I guess the arbitrage is difficult for the authorized participants."

And despite being bond with the underlying assets, WIP can be traded at anytime, that's very important when opportunities arrive.

Post New

Berkshire Hathaway FAQ

---

Contact Shrewd'm
Contact the developer of these message boards.