How it works
Define the exchange rate as units of home currency per one foreign unit. Then home return equals (1 + foreign-asset return) × (1 + currency return) − 1. If the quotation is reversed, invert the exchange rates first. A 10% fall in one quote is not exactly a 10% rise in its reciprocal.
Match dates, valuations and distribution treatment. The asset component should include income consistently if measuring total return. Transaction costs, withholding taxes and conversion spreads can change the investor's actual result. Merely trading a foreign-exposure ETF in the home currency does not by itself remove underlying currency exposure.
Worked example
Assume a fictional asset rises from 100 to 110 foreign units with no distributions. The exchange rate falls from 1.20 to 1.08 home units per foreign unit. Initial home value is 120; final value is 118.80. The asset gains 10%, the currency falls 10%, and combined return is 1.10 × 0.90 − 1 = −1%. Adding the two percentages would incorrectly give zero.
Interpretation and limits
Hedged products require a different analysis including hedge structure, costs and imperfect matching. Companies also have business exposures beyond their listing currency. Capital controls or low liquidity may prevent conversion at a displayed quote. Currency conversion is a measurement exercise, not evidence that money has actually been transferred or repatriated.
Chart practice
Record matching available closed monthly asset prices and obtain exchange rates separately, noting quote direction and timestamps. Student Wyckoff Pro provides chart analysis; it does not reconstruct a personal multicurrency account or certify hedge effectiveness. Keep local price behavior separate from the converted result.
Primary sources
Sources explain the mechanics and limitations; the editorial examples use invented numbers rather than market quotations.
Your next practical step
Continue with analysis of available closed daily, weekly and monthly bars.
Open the first-chart instructions ↗