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How to Convert Currencies in Interactive Brokers

After you have funded your Interactive Brokers account with money, then it is time to start trading.

But first, you may have to convert your money in your Interactive Brokers account into another currency.

The purpose you have a trading account is to buy securities and majority of the securities that you are interested in tends to be overseas in

  1. United States
  2. United Kingdom
  3. Australia
  4. Hong Kong
  5. A lot of other countries

The currencies that the securities trade in tends to be USD, Euro, HKD, AUD.

Without the currencies the security trades in you cannot buy. If you do not have the money in that currency and you have a margin account, Interactive Brokers will by default take it that you wish to borrow on margin to purchase the securities.

So in this article, we discussed all things about FX conversion

IBKR Allows You to Convert Currencies at Near Spot Rates

The spot rate is the price quoted for immediate settlement on a currency.

If you have experience with currency conversion with your local banks, or brokerages, or money changer, you will realize that there is a difference in rates that you were quoted and the rates that you see on certain website.

My experience with local brokerages is that the conversion between SGD and USD or HKD for example is about 0.50% or 50 basis points.

My most frequent broker is Standard Chartered Online Trading and in my post here, we see that they have improved the spread between their rates and another website from 0.80% to 0.30-0.40%.

These are cost to you and if you are investing passively in a portfolio of low cost, diversified ETFs in UK or USA, cost matters.

With IBKR, the usual currency spread I get is soooo low that it is almost like there isn’t a currency spread (as small as 0.1 PIP).

However, there is a small commission charge on the conversion. Usually, it comes up to SGD$2.80.

The above line item is one of my currency conversion. I been a bit trigger happy by converting a small amount, but since the conversion is almost at spot rates and factoring the SG$2.80, the commission cost is 0.09%, which is much lower.

The table above shows how the commmission rates are structured. Think for most of us, it will fall under the first band.

Setting Your Base Currency

I mentioned in the first article on setting up your IBKR account that you can change your base currency rates later.

Your base currency

  1. Determines the currency of translation for your statements and the currency used for the determination of margin requirements.
  2. In addition, charges related to market data and research, inactivity fees, and commission on Forex trades are also charged in your base currency.

I have set mine to Singapore dollars. You may set yours to USD.

Setting your base currency does not affect how you transfer money into Interactive Brokers.

If you set your currency like USD, you can still transfer SGD into IBKR.

If you transfer SGD from your bank account, it will just go into the SGD Cash Balances. If you transfer EUR it will go to your EUR Cash Balances.

If you sell your securities in EUR at a loss, it will still be deposited in your EUR Cash Balances.

Majority of what Base Currency is for… is for reporting and updating purpose.

You can change your base currency under Settings > Account Settings > Base Currency. Base currency changes will not take effect until the next trading day.

In the IB mobile application, it is very convenient to toggle your view from base currency, to the currencies the securities are traded in.

For example, the above view is in base currency. So that is SG$572 in HKD cash balances. For 1883 (Citic Telecom), the P&L of $129 is in SGD.

At the top right corner of your app, bring out this menu and you can toggle Use Base Currency, to switch around.

In HKD, the cash balances is shown as HK$3190 instead of SG$572. The P&L is shown as HK$720.

Base currencies in the app is identified as italic numbers instead of normal numbers.

Converting From One Currency to Another

Currency conversion in Interactive Brokers used to be more complex.

And that option is still around.

Suppose I wish to buy a Hong Kong stock, so I need to convert my SGD to HKD.

On my IB web app, I will go to Order Ticket > then go to Currencies tab.

If I type in SGD, IB will auto search and find the forex pairs involving SGD (the screenshot above is wrong, I was searching for “HKD” instead. think of that as me typing “SGD”)

You will find the SGD/HKD currency pair that you wish to buy or sell (depending on whether you are converting from SGD to HKD or the other way round)

Now, then you get to the tough part.

You need to know how to read a currency pair.

The illustration above may help you understand how to read a currency pair. Going by the above a SGD/HKD pair means Singapore dollar is the base currency and quoted in Hong Kong dollar.

  1. If I buy or bid for a SGD/HKD, it means I am converting from HKD to SGD (buying SGD through selling HKD)
  2. If I sell or ask for a SGD/HKD, it means I am converting from SGD to HKD (selling SGD to get HKD)

So if I need SGD I will sell the equivalent of SGD 5,000 to get HKD.

I key in that I will sell 5000 SGD.HKD. In the order preview above, based on a prevailing rate of $5.56206, I will get HK$27,809. The commission for the transaction is between SG$2.78 to SG$3.48.

If you are ok with this, once you submit the trade, the broker will put your order in queue. If a buyer comes along, he or she will buy your SGD.HKD and will pay you in HKD.

Then the HKD will go into your IB HKD Cash balances.

An Easier Way to Convert Currency

If the above currency conversion sounds cheem to you, then here is the simple way.

Go to your Interactive Brokers mobile app.

Click the Convert Currency.

You will be presented with a rather clean interface. You can start off with putting in how much of the currency you have or the currency you want.

In this example, I specified that I wish to convert $3,000 SGD into HKD.

Once I confirm this conversion, this order will be sent to the exchange (which is the same as the previous example.)

When your trade is confirmed, you can go to Order & Trades > Trades, and if you click on the SGD.HKD trade, you can see the details above.

You can see the commission charged as well (which is in HKD)

Go to Portfolio and you should see your money converted under Cash Balances.

Now you will be wondering why Kyith didn’t showed this in the first place. I want you to feel the pain of what some of the early adopters felt to understand the improvement the team made.

Now that you have the right currency, maybe it is time to talk about making your trade.

My Comprehensive Interactive Brokers How-to Funpack

Here are some of my past articles on wealth building with Interactive Brokers. I hope it makes your life easier and brighter.

  1. An Easy Step-By-Step Guide to Setup Interactive Brokers (IBKR)
  2. How to Fund & Withdraw Funds from Your Interactive Brokers Account
  3. How to Convert Currencies in Interactive Brokers
  4. How to Buy and Sell Stocks and Securities on Interactive Brokers
  5. How Competitive are Interactive Brokers Commissions Pricing? And Also Explaining the US$10 Monthly Activity Fee
  6. Send Money from TransferWise to Interactive Brokers

Do Like Me on Facebook. I share some tidbits that is not on the blog post there often. You can also choose to subscribe to my content via email below.

I break down my resources according to these topics:

  1. Building Your Wealth Foundation – If you know and apply these simple financial concepts, your long term wealth should be pretty well managed. Find out what they are
  2. Active Investing – For active stock investors. My deeper thoughts from my stock investing experience
  3. Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
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ML

Saturday 2nd of January 2021

Hi Kyith, if we don't have enough currency for the stock that we want to trade in, is it a good idea to borrow on margin first? Then, after the trade value is known, then I convert the currency. That way, I don't end up with an excess / deficit foreign currencies. Is there any minimum interest on margin borrowing?

Kyith

Saturday 2nd of January 2021

Hi ML, I think having a little currency is ok la. I did it both ways before. Most of the time, I can calculate how much i need and just convert the needed amount.

Andy H

Wednesday 30th of December 2020

Hi Kyith,

I've got only USD in my interactive brokers account, when I want to withdraw in SGD, it shows balance SGD 0, does it mean I have to convert USD to SGD first in IBKR before I can withdraw SGD to my local SGD bank account?

Appreicate your help.

Andy H

Wednesday 30th of December 2020

@Kyith, my base currency is USD

Kyith

Wednesday 30th of December 2020

Hi Andy what is your base currency?

Jane

Saturday 10th of October 2020

Hi Kyith,

Thanks for doing all the step-by-step posts on IBKR. They are really helpful :)

Just a quick question, if i trade mostly in the US market. Is it better to have the base currency as USD instead?

Recently I ran the Forex P/L details report and noticed that every time I buy/sell a stock, there is some kind of forex fees per transaction. And I ended up with over -S$150 of "realised forex loss" in a month!

May I know what is the best way to work around this situation?

Many thanks in advance!! :)

Kyith

Sunday 11th of October 2020

i think those forex fees are the currency movements between your base currency and the currency they are trading at. If i am right that is the nature of investing in stocks in another currency. I think it matters less which currency you set as your base currency. Eventually, if you spend in SGD, you will have to convert to SGD and if SGD have depreciated against the USD, you will incur some sort of a loss.

Cheryl

Saturday 8th of August 2020

Hi Kyith If I do a currency conversion from SGD to HKD to buy a Hkex listed etf, is my HKD cash available immediately for use? I keep getting the error that I have insufficient settled cash so my etf order cannot go through. Thank you

Kyith

Saturday 8th of August 2020

HI Cheryl, you would have to check if the SGD to HKD conversion is through. The SGD to HKD conversion is a sell SGDHKD transaction that will give you HKD. My experience is that most of the time you have to wait a while (like few minutes) for the transaction to go through. This is because the currency market is rather liquid.

Then, go to your Portfolio and check how much HKD you have. This would depend on whether your app is displayed as your base currency or the actual currency. For example, I displayed my portfolio in base currency, so if I see 3k under HKD, it means I have 3k SGD worth of HKD. That is worth about HK$16,800.

You can then see if you have enough for the amount of units you wish to purchase.

One other thing: try not to convert such as you have exact the amount you need. maybe have 100-200 bucks to spare ba haha.

Dr Goh H

Saturday 1st of August 2020

Hi Kyith,

I have managed to use transferwise to fund my Interactivebrokers from Malaysia using MYR. Will show my readers how to do it in my next post.

Aswin Arshad

Friday 18th of September 2020

Mind sharing the link ?

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