How much of my investment return came from currency?

Separate the return of a foreign asset from the return of its currency, quantify their interaction, and explain why the gain shown in your home currency differs from the stock chart.

Name the three currencies before using a percentage

A foreign investment can involve the security's trading currency, the account's cash currency, and your reporting or home currency. They may be identical, but the ledger should not assume that they are.

The return on a US stock in USD answers how the security performed in its market. The return on the same holding in GBP, EUR, KRW, or JPY answers what happened to your purchasing power at home. Both are useful, but they are different questions.

Measure the asset return in its local currency first

Start with beginning and ending security value in the trading currency and include distributions when calculating total return. This isolates what the asset did before translating the result into your home currency.

For a portfolio, use consistent valuation times and handle buys, sells, dividends, and fees before attribution. Comparing a local closing price with a home-currency account balance mixes security movement, cash flow, and FX into one unexplained number.

Calculate the exchange-rate return in the investor direction

Define the quote as units of home currency per one unit of foreign currency. Currency return is ending FX rate divided by beginning FX rate minus one. A positive result means the foreign currency strengthened against the home currency and helped an unhedged holding.

Quote direction matters. USD per EUR and EUR per USD move inversely. Store the currency pair and convention beside every rate, and use rates from dates and times that match the portfolio valuations.

Combine market and currency multiplicatively

Home-currency return equals (1 + local asset return) multiplied by (1 + currency return), minus 1. If a stock rises 8% in USD and USD strengthens 4% against the home currency, the home-currency return is 12.32%, not exactly 12%.

The extra 0.32 percentage point is the interaction between the asset move and the FX move. A clear attribution can show local return, currency return, interaction, and total home-currency return rather than forcing the interaction into one bucket without explanation.

Separate return attribution from profit attribution

Return attribution explains percentages over a period. Profit attribution explains money. For money attribution, compare the actual home-currency ending value with a counterfactual ending value translated at the beginning FX rate; the difference is a practical currency impact.

Purchases, sales, and dividends during the period require dated exposure. Applying one month-end FX change to the full ending balance overstates currency impact when much of the position was acquired late in the month.

Worked example: the stock fell but the investor gained

Assume a holding starts at $10,000 and the stock falls 3% in USD, ending at $9,700. If USD strengthens 7% against the investor's home currency, the home-currency return is (0.97 × 1.07) − 1 = 3.79%.

The investor did not receive a 7% “FX profit” plus a separate −3% stock loss. The interaction is −0.21 percentage point, so −3% local return + 7% currency return − 0.21% interaction equals 3.79%.

Do not confuse FX exposure with tax FX rules or hedging

Investment return translation, taxable gain conversion, and actual currency trading profit are separate calculations. Tax authorities may prescribe transaction-date conversion rules that do not match a performance chart, so one FX attribution number should not be reused as a tax estimate.

A hedged ETF or forward contract adds hedge return, carry, fees, and possible tracking difference. For hedged holdings, show local asset return, spot FX impact, hedge result, costs, and residual separately instead of assuming currency impact is zero.

What Portle should show for foreign holdings

The screen should identify trading and reporting currencies, beginning and ending FX rates, local-currency return, currency return, interaction, home-currency return, and money contribution by currency. It should also flag missing or stale rates and disclose the valuation cut-off.

Method references: MSCI Global Currency Indices methodology (msci.com/documents/10199/0b995d45-15ef-4570-9aa0-ef28baa89083), MSCI Global Fund Reconciliation Methodology on currency impact (msci.com/downloads/documents/indexes/real-assets/real-estate-methodology-documents/key-methodology-documents/804eccf3-5726-5fa4-15f2-ca3e56534d84.pdf), and MSCI's currency-risk research. Portle uses the ledger to keep price and FX contribution visible instead of collapsing them into one unexplained gain.