There are roughly one million Australians living abroad at any given time, and for many of them, currency risk is a constant, low-grade headache. Earning in pounds, US dollars, or Singapore dollars while still holding an Australian mortgage, contributing to super, or planning to eventually return home means that exchange rate movements can have a real impact on financial wellbeing.

The Core Problem

Suppose you are an Australian working in London and earning in British pounds. Your salary is fixed in GBP, but many of your financial obligations are denominated in AUD. If the pound weakens against the Australian dollar, your mortgage repayments effectively become more expensive relative to your income. If the pound strengthens, you get a windfall.

This is currency risk in its most personal form. Unlike a multinational corporation with a treasury department and hedging programmes, most expats are managing this exposure with limited tools and knowledge. The decisions they make — or fail to make — can add up to tens of thousands of dollars over a multi-year posting.

Common Approaches

Regular Transfers at Market Rate

The simplest strategy is also the most common: transfer money home when you need to, at whatever rate is available. This is essentially a decision not to manage currency risk at all, and for short postings of a year or two, it can be perfectly reasonable. Over such short periods, the exchange rate could move in either direction, and the transaction costs of more sophisticated strategies may not be worth it.

The key consideration here is choosing a transfer provider carefully. The difference between a major bank’s exchange rate and a specialist transfer service can be substantial — often one to two per cent on each transaction. Over a year of monthly transfers, that adds up.

Dollar Cost Averaging

A more deliberate approach involves transferring a fixed amount at regular intervals, regardless of the exchange rate. This is the same principle as dollar cost averaging in share investing. You will not get the best rate every time, but you also will not get the worst. Over time, your average rate tends to smooth out the volatility.

This approach works well for expats with regular, predictable obligations back home — mortgage repayments being the obvious example. Setting up automatic monthly transfers removes the temptation to time the market and ensures bills are always covered.

Setting Rate Alerts and Limit Orders

Most currency transfer services allow you to set alerts when a particular exchange rate is reached, and many offer limit orders — instructions to execute a transfer automatically when the rate hits your target. This lets you take advantage of favourable movements without watching the market constantly.

For example, if GBP/AUD is trading at 1.90 and you would be happy converting at 1.95, you can set a limit order at that level. If the rate reaches it, the transfer executes automatically. The risk, of course, is that the rate never reaches your target and you end up transferring at a worse rate later.

Forward Contracts

Some specialist providers offer forward contracts to retail customers. A forward contract locks in an exchange rate for a transfer at a future date. If you know you will need to transfer $50,000 AUD in six months, you can fix the rate today and remove the uncertainty entirely.

Forward contracts are standard practice in corporate treasury but less common among individual expats. They typically require a deposit and a minimum transaction size, which can put them out of reach for smaller transfers. But for large, planned transfers — buying property back home, for instance — they can provide valuable certainty.

Tax Considerations

Currency gains and losses have tax implications that many expats overlook. If you are an Australian tax resident, foreign exchange gains on personal transactions under $250,000 are generally exempt from capital gains tax. But the rules become more complex for larger amounts, investment income, and non-resident taxpayers. Getting the tax treatment wrong can be far more costly than any adverse currency movement.

Practical Steps

If you are an Australian expat earning overseas, a few concrete actions can make a meaningful difference. Compare at least three transfer providers on both exchange rates and fees before committing. Set up automatic transfers for regular obligations. Keep a reserve in both currencies to avoid being forced to transfer at unfavourable rates. And review your approach annually — what worked when rates were stable may need adjusting if volatility picks up.

Currency risk is one of those problems that rarely feels urgent until it costs you real money. A little planning goes a long way.

James Hargreaves is a Sydney-based financial journalist covering currency markets and macroeconomic trends.