FX Rates

Mike Alexander mta at umich.edu
Sat Jan 8 13:21:28 EST 2011

--On January 8, 2011 3:17:43 PM +0000 Ken <kmailuk at gmail.com> wrote:

> Thanks for your reply but I am not sure I follow your point.  In your
> example the user has made two FX transactions at different FX rates.
> In terms of reporting the values of the trades one could use the
> average of the two rates as the fair market conversion or one could
> have a third GBP/USD price series which indicates the fair market
> conversion rate or something similar.  Just because the FX conversion
> at Bank A (or at a bid price) and the conversion at Bank B (or at the
> ask price) are different should not mean a jump should be impossible.
> My point is if I have prices for IBM/USD (say $150/share and I have
> 100 shares) and I have prices for GBP/USD (say $1.50/£ and I have
> £1,000), I can generate a report in reporting currency USD.  But if I
> want to generate a report in GBP, GnuCash is not capable of doing this
> even though it has all the necessary information. Is it not possible
> to add functionality?  The calculation of only a single conversion
> jump would greatly improve the reporting functionality in a
> multi-currency/asset environment.  What am I missing?

You can't really chain currency conversions since there is "friction" 
in them.  Converting USD->GBP->EUR isn't the same as converting 
USD->EUR.  However GnuCash already ignores this to some extent since it 
uses inverse conversions.  If it has a USD->GBP conversion I think it 
uses it to convert GBP->USD which isn't really legitimate either.

However, it might make sense to do what you suggest so long as only two 
of the commodities involved are currencies.  Something like 
stock->currency->currency or currency->currency->stock.  I'm not sure 
if this makes sense or not, but it might.


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