What Currency Should You Measure Your Investment Return In?
When deciding what currency to measure investment returns in, use the currency needed for the expenses the investment will fund. Keep the loan’s original-currency record alongside it. That lets you see how much came from interest and how much came from changes in exchange rates.
Why a fixed rate does not mean a fixed currency return
Does currency affect a fixed interest rate?
A fixed contractual rate does not change directly with exchange rates. Interest accrues in the currency stated in the agreement. The value of that interest in another currency can change from day to day.
Full repayment may therefore produce a lower return than expected once the proceeds are converted. A favourable currency movement can also increase the amount received without changing what the borrower paid.
This distinction matters when reading Annualized Return on Investment (AROI), Maclear’s main return metric. The guide to what AROI measures explains the return calculation for an investment claim. A displayed percentage does not establish the return you will realise in your spending currency.
The agreement determines how interest is calculated. It cannot determine the exchange rate offered when you convert the payments, and the borrower must still meet its obligations.
Why your result can involve three different currencies
Start by checking the deal currency against the account currency. A claim may be denominated in one currency while its payments are credited in another. If you spend in a third currency, a further conversion may be necessary before you can use the money.
| Deal currency | Account currency | Spend currency |
|---|---|---|
| Definition: the currency in which the claim and payment obligations are denominated. | Definition: the currency in which the platform holds or credits your cash. | Definition: the currency used for everyday expenses or the spending this investment will fund. |
| When exchange rates matter: when funds are converted into the claim or its payments are converted out; translated value can change during the term. | When exchange rates matter: whenever funds enter or leave through conversion, and while a foreign-currency balance is held. | When exchange rates matter: when contributions and receipts are valued or converted into the currency you use. |
| What stays unchanged: exchange rates alone do not alter the fixed rate or contractual accrual in deal currency. | What stays unchanged: the nominal balance, unless payments, transactions or charges change it. | What stays unchanged: the currency chosen to measure the result; foreign receipts have a variable translated value. |
| What you control: choosing the denomination where alternatives exist, without control over exchange-rate movements. | What you control: choosing an available account or conversion route within the service’s rules. | What you control: the conversion date where permitted, without control over the rate subsequently available. |
When all three match, no direct conversion exposure arises along this route. If they differ, identify the transactions that move money between them. A balance displayed in another currency may be a valuation rather than evidence that any money has been exchanged.
The platform’s location does not settle the question. Swiss headquarters do not establish a Swiss-franc account or loan. Maclear’s account currencies, funding and withdrawal options, and conversion charges need product confirmation; no particular setup is assumed here.
Where exchange rates affect the outcome
Your entry conversion determines how much deal-currency principal the contribution buys. The exit conversion determines how much spending currency the receipts produce. Any exchange between the deal and account currencies adds a transaction to that calculation.
Between those dates, contractual interest continues to accrue in deal currency. The claim’s translated value can still move with exchange rates. You may see a different spending-currency value on your statement even though no payment or conversion has occurred.
An executed transaction fixes the conversion result for that amount. A translated valuation shows its value at a particular time, with the eventual transaction still ahead.
Some platforms and payment providers convert funds at deposit and withdrawal. These are common industry arrangements, rather than a confirmed description of Maclear’s process. Check which provider performs each conversion and retain its transaction record.
Regular interest payments can create several conversion dates. Use each executed rate if the payments are converted separately. If you leave the money in a foreign-currency balance, exposure continues while it remains there.
The explanation of Secondary Market mechanics and risks covers another possible exit. A sale turns a loan share into cash proceeds. Converting that cash is a separate transaction with its own rate and costs.
Why currency risk and credit risk need separate assessment
Is currency risk the same as credit risk?
No. Credit risk concerns whether the borrower pays what it owes. Currency risk concerns the value of those payments in another currency. A borrower may fulfil the agreement while an adverse exchange-rate movement reduces the proceeds available for your expenses.
Assessing currency risk versus credit risk in lending means checking the borrower’s repayment capacity separately from your conversion exposure. Otherwise, a favourable currency result could obscure repayment problems, or a conversion loss could be mistaken for poor loan performance.
The risks can interact. A company earning revenue in one currency and servicing debt in another may face higher repayment costs after a currency movement. That belongs in the borrower’s credit assessment. Your own conversion of the receipts creates a separate exposure.
Maclear’s lending-risk framework discusses the wider assessment. Its guide to geographic diversification concerns where borrowers operate. Country and currency should be checked separately because several countries may share a currency, while a loan may be denominated outside the borrower’s domestic currency.
A fixed contractual rate does not fix the value of repayments in your spending currency. Currency risk and credit risk require separate assessment; this article offers no exchange-rate forecasts or advice on conversion timing.
How a shorter loan term limits the currency exposure window
How does loan term affect currency exposure?
A shorter term can reduce the scheduled time between converting money into an investment and converting the repayment back. Compared with a multi-year instrument, the principal is due to return sooner.
That gives exchange rates a shorter period in which to move before scheduled repayment. It places no ceiling on the movement itself. Rates can change substantially over short periods, so a short loan does not provide currency hedging.
Currency exposure in fixed-term lending also includes the time spent holding foreign-currency cash. Money waiting to be invested remains exposed, as do proceeds left unconverted after repayment. A late payment can extend the exposure beyond the agreed term.
Repeated reinvestment can keep capital in the same currency for years, even when each loan is short. When reviewing diversification across loans, follow that currency position through successive investments. Repayment ends the individual loan, but exposure continues if the money stays in the currency.
How to calculate return in your own currency
How do I account for conversion costs in my return?
Use the transaction records to reconstruct what happened to each receipt:
- Record the amount credited in account currency and the date received. Separate returned principal from interest so that repayment of your own capital is not counted as earnings.
- Apply the rate from the actual conversion date. If you held the funds after receipt, keep both dates. Reusing the original investment-date rate would miss the currency movement.
- Account for conversion costs. Deduct a separately charged commission and check whether the spread is already included in the executed rate. Avoid charging the same cost twice in your calculation.
Compare total net receipts in spending currency with the amount contributed in that currency, including entry costs. Subtract the contribution to find the monetary gain or loss. Dividing that result by the contribution gives a simple holding-period return, without annualising it.
For money still held in another currency, use a dated translated valuation and label it unrealised. It remains an estimate of spending-currency value until conversion takes place.
Frequently asked questions
Does the interest rate on an investment claim change with the exchange rate?
No. Exchange rates do not directly change a fixed contractual rate in the claim’s currency. They change what principal and interest represent in another currency. Whether the borrower pays remains a separate question, so the fixed rate determines neither payment nor the amount available in your spending currency after conversion.
What is the difference between deal currency, account currency, and spend currency?
Deal currency denominates the claim, account currency is what the platform holds or credits, and spend currency is what you use for expenses. They may match or differ. Follow the actual payment route to identify where money is exchanged, which transaction rates apply and what conversion charges are incurred.
Is currency risk the same as credit risk?
No. Credit risk concerns repayment by the borrower; currency risk concerns the value of money in another currency. They need separate assessment, although some economic events can affect both. An overall return figure may include their combined effect without showing whether a gain or loss arose from lending or conversion.
Does a shorter loan term reduce currency risk?
It limits the scheduled exposure window without eliminating currency risk. Exchange rates can move sharply over short periods. Holding foreign-currency balances or reinvesting repayments extends exposure beyond one loan, while late repayment may extend it unexpectedly. A shorter term does not establish the exchange rate available when the money is converted.
How do I calculate my actual return in my own currency?
Use actual conversion-date rates for the receipts and account for conversion costs. Compare net proceeds with the original spending-currency contribution, including entry costs, and distinguish returned principal from earnings. Any balance still held in another currency should be reported as an unrealised translated valuation rather than an executed conversion result.
Maclear AG is a Swiss peer-to-peer (P2P) lending and crowdlending platform, headquartered in Switzerland. The company acts as a financial intermediary in the non-banking sector and is a member of PolyReg SRO, in accordance with Swiss financial regulations, particularly regarding AML, KYC, and GDPR. Maclear provides individual and qualified investors access to carefully selected business loan opportunities, with integrated risk assessment, a Provision Fund, and a Secondary Market for liquidity.
The content of this article is provided for informational and educational purposes only. It does not constitute investment, financial, tax, or legal advice. Peer-to-peer (P2P) lending and crowdlending investments carry a risk of partial or total loss of capital. Past performance does not predict future results. Liquidity on a secondary market is not guaranteed. Readers are encouraged to conduct their own research and consult qualified advisors before making any financial decisions. The availability of products and services may be restricted in certain jurisdictions.