Managing assets in multiple currencies

One of the challenges many expats face in managing personal finances is having assets denominated in different currencies.  This adds both complexity to monitoring, and risk to managing the assets.

If we take monitoring first, i'll summarise some of the challenges i've encountered and my approach to dealing with these.

The first choice i faced was which currency to monitor assets in, ie. whether to translate everything to a preferred/primary currency, monitor everything in its own currency, or monitor all assets in multiple currencies (or a combination of these).  My approach is to track each asset in its underlying currency, and then translate the total to my primary currency, but also to then track this total in the other major currencies used.  I track the total in multiple currencies mainly because i'm not sure yet where i'll be based later in life.

A second issue encountered was which fx rates to use, and how frequently to update these.  This is perhaps a sign of my limitations in microsoft excel, but i have found changing fx rates adds a lot of complexity to the monitoring of assets in multiple currencies, with current income being effected, along with the need to re-translate the existing asset base.  My preferred approach is therefore to minimise changes in fx rates by taking a 'benchmark' or recent historical average rate, and sticking with this as long as possible ignoring short term fluctuations.  I then only change fx rates when they break out of a recent range and move away from my benchmark rates.  Whilst this doesn't remove the complexities, it does reduce the frequency of facing these complexities!  In order to minimise error, i've tried to build in checks to make sure everything still adds up after a change, and to also include fields to isolate the impact of fx changes, which helps in understanding & managing the risk.

In terms of fx risk management, whilst i don't have a clearly defined strategy, my approach over the last couple of years has been to translate as much as possible into my original home currency.  This is partly as i have so far assumed there is a good chance i'll live there again in the future, and partly because my original home currency has been closer towards its historic weak point against other major currencies, making it cheap & attractive to buy. I have also found a greater choice & easier access to assets in this currency to invest in, to manage my finances.

However, recently i have begun thinking that there is less certainty where i will be based in the long term. It would therefore be prudent to have a greater balance to the currency mix of my assets, giving greater flexibility for the future and helping to hedge fx risk through diversification.  This is likely to result in a gradual re-balancing of my currency exposure going forward, which may also have knock on implications for my overall asset allocation.

If there are any significant fx movements going forward, i may look to opportunistically take advantage of these, but this is only likely to be between currencies that i currently have or am likely to use.  I'm not particularly interested in speculating in a wider range of currencies, and my focus is more on risk management rather than seeing currencies themselves as an investment tool.