How does the value of an asset (valued in two different currencies) change when the exchange rate changes?
Gold is traded on the London stock exchange (LSE) and the New York stock exchange (NYSE) under various separate asset tickers, mainly denominated in sterling and US dollars respectively.  These stocks will reflect FX changes very quickly.  If you sold LSE gold and foreign exchanged your sterling to dollars to buy NYSE gold you would almost certainly lose on the spreads upon selling, FX'ing and re-buying. In short, the same asset doesn't exist in multiple currencies.  It may have the same International Securities Identification Number (ISIN), but it can trade with different Stock Exchange Daily Official List (SEDOL) identifiers, reflecting different currencies and/or exchanges, each carrying a different price at any one time. The value of the asset doesn't change just because of the exchange rate change. If a thing (valued in USD) costs USD $1 and USD $1 = CAN $1 (so the thing is also valued CAN $1) today and tomorrow CAN $1 worth USD $0.5 - the thing will continue being worth USD $1. If the thing is valued in CAN $, after the exchange rate change, the thing will be worth USD $2, but will still be valued CAN $1. What you're talking about is price quotes, not value. Price quotes will very quickly reach the value, since any deviation will be used by the traders to make profits on arbitrage. And algo-traders will make it happen much quicker than you can even notice the arbitrage existence. It depends on the asset and the magnitude of the exchange rate change relative to the inflation rate. If it is a production asset, the prices can be expected to change relative to the changes in exchange rate regardless of magnitude, ceteris paribus. If it is a consumption asset, the prices of those assets will change with the net of the exchange rate change and inflation rate, but it can be a slow process since all of the possessions of the country becoming relatively poorer cannot immediately be shipped out and the need to exchange wants for goods will be resisted as long as possible. "If there is a very sudden and large collapse in the exchange rate then because algorithmic trades will operate very fast it is possible to determine “x” immediately after the change in exchange rate. All you need to know is the order book. You also need to assume that the algorithmic bot operates faster than all other market participants so that the order book doesn’t change except for those trades executed by the bot. The temporarily cheaper price in the weakened currency market will rise and the temporarily dearer price in the strengthened currency market will fall until the prices are related by the new exchange rate. This price is determined by the condition that the total volume of buys in the cheaper market is equal to the total volume of sells in the dearer market.   Suppose initially gold is worth $1200 on NYSE or £720 on LSE. Then suppose the exchange rate falls from r=0.6 £/$ to s=0.4 £/$.  To illustrate the answer lets assume that before the currency collapse the order book for gold on the LSE and NYSE looks like: GOLD-NYSE   Sell (100 @ $1310) Sell (100 @ $1300) <——— Sell (100 @ $1280) Sell (200 @ $1260) Sell (300 @ $1220) Sell (100 @ $1200) ————————— buy (100 @ $1190) buy (100 @ $1180)   GOLD-LSE Sell (100 @ £750) Sell (100 @ £740) ————————— buy (200 @ £720) buy (200 @ £700) buy (100 @ £600) buy (100 @ £550) buy (100 @ £530) buy (100 @ £520) <——— buy (100 @ £500)   From this hypothetical example, the automatic traders will buy up the NYSE gold and sell the LSE gold in equal volume until the price ratio ""s"" is attained. By summing up the sell volumes on the NYSE and the buy volumes on the LSE, we see that the conditions are met when the price is $1300 and £520. Note 800 units were bought and sold.   So “x” depends on the available orders in the order book. Immediately after this, however, the price of the asset will be subject to the new changes of preference by the market participants. However, the price calculated above must be the initial price, since otherwise an arbitrage opportunity would exist."
From an investor's standpoint, if the value of crude oil increases, economies that are oil dependent become more favourable (oil companies will be more profitable).  Therefore, investors will find that country's currency more attractive in the foreign exchange market. There's another dimension here as currency conversion isn't necessarily the final answer.  As stated by others, converting money between the three should theoretically end up with the exact same value, less transactional costs.   However the kink is that the price of most products are not updated as the currencies change.  In many cases the price difference is such that even accounting for shipping and exchange fees, purchasing a product from a distributor in a foreign country can be cheaper than just picking it up at the local store.   You might even be able to take advantage of this when purchasing at a single store.  If that store is set up to accept multiple currencies then it's a matter of looking at the conversion rates the moment you are buying and deciding which one is the cheapest route for you.  Of course, this generally will not work for smaller purchases like a cup of coffee or a meal.  Primarily because the fee for the exchange might eclipse any savings. If I understand what you're asking, I think you're looking at the relationship wrong.  Yes, when one currency has a higher interest rate relative to another, it's value should, theoretically, appreciate.  For example, if the USD interest rate is 10% and the EUR is 5%, the USD should appreciate in value against the EUR.  However, the parity relationship tells you the price at which an investor would be indifferent to the difference in interest rates.  So using the formula for interest rate parity:  (1+r(USD))/(1+r(EUR)) = F/S   and plugging in the interest rates from above and a spot rate of $1.5/EUR:  (1.1)/(1.05) = F/(1.5)  The 1 year forward rate would have to be $1.5714/EUR in order for the investor to be INDIFFERENT between holding USD or EUR.  All this assuming interest rate parity holds.  I'm not big on Econ but this is how I understood it when studying for the CFA exam the past few months.  So please, someone correct me if I'm wrong. "The basic idea is that money's worth is dependent on what it can be used to buy. The principal driver of monetary exchange (using one type of currency to ""buy"" another) is that usually, transactions for goods or services in a particular country must be made using that country's official currency. So, if the U.S. has something very valuable (let's say iPhones) that people in other countries want to buy, they have to buy dollars and then use those dollars to buy the consumer electronics from sellers in the U.S. Each country has a ""basket"" of things they produce that another country will want, and a ""shopping list"" of things of value they want from that other country. The net difference in value between the basket and shopping list determines the relative demand for one currency over another; the dollar might gain value relative to the Euro (and thus a Euro will buy fewer dollars) because Europeans want iPhones more than Americans want BMWs, or conversely the Euro can gain strength against the dollar because Americans want BMWs more than Europeans want iPhones. The fact that iPhones are actually made in China kind of plays into it, kind of not; Apple pays the Chinese in Yuan to make them, then receives dollars from international buyers and ships the iPhones to them, making both the Yuan and the dollar more valuable than the Euro or other currencies. The total amount of a currency in circulation can also affect relative prices. Right now the American Fed is pumping billions of dollars a day into the U.S. economy. This means there's a lot of dollars floating around, so they're easy to get and thus demand for them decreases. It's more complex than that (for instance, the dollar is also used as the international standard for trade in oil; you want oil, you pay for it in dollars, increasing demand for dollars even when the United States doesn't actually put any oil on the market to sell), but basically think of different currencies as having value in and of themselves, and that value is affected by how much the market wants that currency." There are two impacts: First, if the pound is dropping, then buying houses becomes cheaper for foreign investors, so they will tend to buy more houses as investments, which will drive house prices up. Second, in theory you might be able to get a mortgage in a foreign country, let's say in Euro, and you might hope that over the next few years the pound would go up again, and the Euros that you owe the foreign bank become worth less. QE2 will mean that there are about $500 billion dollars in existence which weren't there before. These dollars will all be competing with the existing dollars for real goods and services, so each dollar will be worth a little less, and prices will rise a little. This is inflation. You can probably expect 1.5%-2% annual inflation for the US dollar over the next several years (the market certainly does in the aggregate, anyway). This is in terms of US-based goods and services. QE2 will also reduce the amount of other currencies you can get for the same dollar amount. The extent to which this will occur is less clear, in part because other currencies are also considering quantitative easing. Your long-term savings should probably not be in cash anyway, because of the low returns; this will probably affect you far more than the impact of quantitative easing. As for your savings which do remain in cash, what you should do with them depends on how you plan to dispose of them. The value of a currency is usually pretty stable in terms of the local economy's output of goods and services - it's the value in international trade which tends to fluctuate wildly. If you keep your savings in the same currency you plan to spend them in, they should be able to maintain their value decently well in the intermediate term. First question:  Any, probably all, of the above. Second question:  The risk is that the currency will become worth less, or even worthless.  Most will resort to the printing press (inflation) which will tank the currency's purchasing power.  A different currency will have the same problem, but possibly less so than yours.  Real estate is a good deal.  So are eggs, if you were to ask a Weimar Germany farmer.  People will always need food and shelter. A currency that is strong right now is one that is expensive for you to buy. The perfect one would be a currency that is weak now but will get stronger; the worst currency is one that is strong today and gets weak. If a currency stays unchanged it doesn't matter whether it is weak or strong today as long as it doesn't get weaker / stronger. (While this advice is correct, it is useless for investing since you don't know which currencies will get weaker / stronger in the future).  Investing in your own currency means less risk. Your local prices are usually not affected by currency change. If you safe for retirement and want to retire in a foreign country, you might consider in that country's currency. Now, is there any clever way to combine FOREX transactions so that you receive the US interest on $100K instead of the $2K you deposited as margin?  Yes, absolutely. But think about it -- why would the interest rates be different? Imagine you're making two loans, one for 10,000 USD and one for 10,000 CHF, and you're going to charge a different interest rate on the two loans. Why would you do that? There is really only one reason -- you would charge more interest for the currency that you think is less likely to hold its value such that the expected value of the money you are repaid is the same. In other words, currencies pay a higher interest when their value is expected to go down and currencies pay a lower interest when their value is expected to go up. So yes, you could do this. But the profits you make in interest would have to equal the expected loss you would take in the devaluation of the currency. People will only offer you these interest rates if they think the loss will exceed the profit. Unless you know better than them, you will take a loss. The big risk for a bank in country X is that they would be unfamiliar with all the lending rules and regulations in country Y. What forms and disclosures are required, and all the national and local steps that would be required. A mistake could leave them exposed, or in violation of some obscure law. Plus they wouldn't have the resources in country Y to verify the existence and the actual ownership of the property. The fear would be that it was a scam. This would likely cause them to have to charge a higher interest rate and higher fees. Not to mention that the currency ratio will change over the decades.   The risks would be large. Yes, the ADR will trade on a separate exchange from the underlying one, and can (and does) see fluctuations in price that do not match the (exchange corrected) fluctuations that occur in the original market. You are probably exposing yourself to additional risk that is related to: "Lmao so the fact that the government ""could possibly switch currency"" negates the current demand they create? The government creates a demand for USD. That alone is enough to say dollars have intrinsic value.   Add to that the fact that there are trillions of dollars in outstanding government bonds that are required to be paid out in USD when they mature. Changing the currency would be considered a form of default by many and could have massive negative consequence far outweighing the benefits of the rapid adoption of blockchain. Even if they stopped issuing bonds today they would still have ones maturing until 2047.   It's like saying bananas don't have monetary value because people might decide to stop buying them. Yeah, it's true they would lose value if that happened but as of today it's just not true" Stocks, gold, commodities, and physical real estate will not be affected by currency changes, regardless of whether those changes are fast or slow.  All bonds except those that are indexed to inflation will be demolished by sudden, unexpected devaluation. Notice: The above is true if devaluation is the only thing going on but this will not be the case.  Unfortunately, if the currency devalued rapidly it would be because something else is happening in the economy or government.  How these asset values are affected by that other thing would depend on what the other thing is.  In other words, you must tell us what you think will cause devaluation, then we can guess how it might affect stock, real estate, and commodity prices. "I found an answer by Peter Selinger, in two articles, Tutorial on multiple currency accounting (June 2005, Jan 2011) and the accompanying Multiple currency accounting in GnuCash (June 2005, Feb 2007). Selinger embraces the currency neutrality I'm after. His method uses ""[a]n account that is denominated as a difference of multiple currencies... known as a currency trading account."" Currency trading accounts show the gain or loss based on exchange rates at any moment.  Apparently GnuCash 2.3.9 added support for multi-currency accounting. I haven't tried this myself. This feature is not enabled by default, and must be turned on explicity. To do so, check ""Use Trading Accounts"" under File -> Properties -> Accounts. This must be done on a per-file basis. Thanks to Mike Alexander, who implemented this feature in 2007, and worked for over 3 years to convince the GnuCash developers to include it. Older versions of GnuCash, such as 1.8.11, apparently had a feature called ""Currency Trading Accounts"", but they behaved differently than Selinger's method." "Congratulations on your graduation and salary.  You are in a great career field (I know from experience.)  As a background, I would feel pretty confident in your salary as demand for SE is pretty high right now.  During my career there were times that demand was pretty to very low.  Somehow I survived 2001 & 2002, but 2003 was a pretty rough year for me. Here is what I would do if I were you.   Paying off the smallest loans first gives you some great ""wind in the sails"", and encourages you to keep going.  I really like this approach despite being not the most mathematically efficient.   I'd reduce my car loan payment back to $200/mo. and put that as the last one to pay off.   With the tax refund, and any money left over, I pay off the student loans smallest to largest.  I would also consider reducing your savings to something around the 1K->2k range, and use that to pay down debt. If you use your tax refund, and some of the savings you'd have like 34K left to pay off.  Could you do that in like 14 months?  I think you could depending on your other expenses.  No more than 18 months, and if you really worked hard and picked up some work on the side maybe a year.   That is what I would do."