Question 1

What is currency exposure and why does it matter?

Accepted Answer

Currency exposure is the degree to which changes in exchange rates affect the value of an investment or portfolio. An investor who holds assets denominated in a foreign currency has currency exposure because a strengthening home currency will reduce the value of those assets when converted back, even if the underlying investment performed well. For internationally diversified portfolios, currency risk can account for more short-term volatility than asset-class selection. Understanding your exposure is the first step toward deciding whether to hedge it.

Question 2

How do I calculate my portfolio's currency exposure?

Accepted Answer

For each position, multiply the current market value in the foreign currency by the current exchange rate to get your home-currency equivalent. Then divide each position's home-currency value by your total portfolio value to get the percentage weight. For example, if you hold AUD 50,000 in Australian equities and your total portfolio converted to USD is USD 200,000, your AUD exposure is 25%. The Worthmap Currency Exposure Calculator does this across multiple currencies simultaneously, showing weighted exposure and simulating the impact of exchange-rate shifts on your total net worth.

Question 3

Should I hedge my currency exposure?

Accepted Answer

It depends on your time horizon and asset type. For equity portfolios held over decades, academic evidence generally supports accepting currency risk: over long periods, exchange-rate effects tend to revert and hedging costs erode returns. For portfolios with near-term cash needs, fixed-income holdings, or significant single-currency concentration, hedging often makes sense. A practical rule: if currency exposure in a single pair exceeds 20–30% of your portfolio and your investment horizon is under five years, at least evaluate the cost of a partial hedge.

Question 4

What is the difference between FX exposure and FX risk?

Accepted Answer

Currency exposure is the size of the position affected by exchange-rate movements - how much of your portfolio is denominated in a foreign currency. Currency risk is the probability-weighted potential loss from adverse rate movements given that exposure. You can have high exposure with low risk (if the currencies are tightly correlated or you have naturally offsetting flows) or low exposure with high risk (if the currency pair is highly volatile). The Currency Exposure Calculator quantifies exposure; scenario analysis quantifies the risk given assumed rate moves.

Question 5

Is the Currency Exposure Calculator free to use?

Accepted Answer

Yes. The Worthmap Currency Exposure Calculator is completely free, requires no account, and runs entirely in your browser. No inputs are stored or transmitted to a server. You can add multiple currency positions, select a base currency, and simulate exchange-rate movements to see the impact on your total net worth immediately.

Currency Exposure Calculator - FX Risk Analysis