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FX Conversion

FX conversions exchange one currency for another within the same broker account. One currency balance decreases while another increases — no securities or brokers change.

🔑 Key Properties

Property From (source) To (target)
Code FX_CONVERSION FX_CONVERSION
Cash effect ⬇️ Source currency ⬆️ Target currency
Asset effect — —
Broker Same on both sides Same on both sides
Currency Different on each side Different on each side
Tax event Varies by jurisdiction Varies

📊 How It Works

An FX conversion records two entries on the same broker with different currencies. The conversion rate is implicit from the amounts:

\[ FX_{rate} = \frac{\text{Amount}_{target}}{\lvert\text{Amount}_{source}\rvert} \]

FX conversions may be:

  • Explicit: User deliberately converts currencies (e.g., EUR → USD before buying US stocks)
  • Implicit: Broker auto-converts when buying a foreign-denominated asset

Implicit FX and Fees

When a broker auto-converts currency, the effective rate often includes a spread. The difference between the market rate and the effective rate is essentially a hidden fee:

\[ \text{Implicit Fee} = \lvert\text{Amount}_{source}\rvert \times (\text{Market Rate} - \text{Effective Rate}) \]

📈 Implied Rate & Broker Spread

LibreFolio automatically computes the implied exchange rate from the two amounts:

\[ \text{Implied Rate} = \frac{\lvert\text{Amount}_{target}\rvert}{\lvert\text{Amount}_{source}\rvert} \]

This is compared with the market rate from the FX subsystem at the transaction date. The difference is the broker spread:

\[ \text{Spread} = \text{Implied Rate} - \text{Market Rate} \]
\[ \text{%Spread} = \frac{\text{Spread}}{\text{Market Rate}} \times 100 \]

Market Rate Availability

The market rate comparison requires the relevant FX pair to be configured in LibreFolio's FX system. If the pair is not configured or no rate exists for the transaction date, only the implied rate is shown.

🔀 Relationship with Deposits/Withdrawals

Under the hood, an FX Conversion is composed of a Withdrawal (source currency) and a Deposit (target currency). LibreFolio supports:

Operation Result
Split (unlink) FX Conversion → independent Withdrawal + Deposit
Promote (link) Withdrawal + Deposit → FX Conversion

Promote constraints: different currencies, same broker.

See also: 💱 FX Rates — how to configure and sync exchange rates in LibreFolio.