I’m new to Portfolio Performance and still getting familiar with how it works. I’ve noticed something that I need help understanding.
I added a currency pair (USDEUR) as a benchmark to the performance chart by creating it in the securities panel and then adding it to the chart. However, I noticed an issue:
When my base currency is USD, the performance of the USDEUR pair matches the value shown on Yahoo Finance.
When I change the base currency to EUR, the performance value changes, even though the absolute values for the pair remain the same.
Could someone explain why this happens? Visually, the chart looks the same, but when the base currency is EUR, the YTD performance shows 14.6%. When the base currency is USD, it changes to 7.05%.
To me, this sounds like expected behavior as the EUR has been depreciating against the USD recently.
I assume you have a high proportion of securities with USD base currency (like shares of US companies). If you look at these foreign securities from a EUR perspective, it is now more expensive to buy them because the EUR has lost value. On the other hand, dividends with a USD base currency now pay you more EUR than before.
Perhaps it will become clearer if you study the topic of currency risk.
Thank you for your explanation. I understand that if I bought, for example, an ETF with funds in USD but traded in EUR, the performance of my holdings would change when swapping the base currency between EUR and USD. However, I thought that by adding a currency pair rate to the performance chart, it would reflect the performance of the currency pair itself, independent of my investments. My intention was to measure the isolated performance of this currency pair, not its impact on my portfolio.