forex hedging

[gbfabiani]

Assume I decide to buy a coverage on currencies . For example, I buy some stock in Australia in AUD, and over time I decide to protect myself against currency fluctuations , I keep the shares but I cover the AUD against the US$ .

How can I book such a transaction ?
thanks
giovanni

[Mark]

Hi giovanni,

Just record all the transactions as they happen. So, when you buy a stock in AUD, this is a purchase of that stock assigned to the AUD currency, and a sell of AUD cash. If you later sell US cash, and buy AUD cash, record a sell of US cash, and a buy of AUD cash. You would want to have a cash account for each currency you hold cash in.

If you have multiple cash accounts in different currencies in the same account, you can set up sub-portfolios for each currency, and assign the appropriate cash account as the default cash account for each currency sub-portfolio.