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Introduction > Banking Services > Loans > Currency Loan

Currency loan

This type of service is used by clients who trade securities for two main purposes. The first of these is to reduce currency risk due to exchange rate changes in foreign exchange markets. The second is to complete a trade in another currency than the one the client currently has available on his or her trading account in order to avoid making a purchase on the foreign exchange market. This allows a client to save on costs in the difference between the purchase and sale price of the currency.

When using a currency loan, there is no complete elimination of the currency risk. A currency loan covers an investment at the time of purchase, however it does not cover the losses or gains caused by the movement of the purchased stock.

  • Loan can be used to purchase any stocks registered on markets in the Czech Republic, Germany and the US
  • Eliminates currency conversion costs - the currency spread
  • Easy transfer of trading activities between domestic and foreign markets
  • If a currency strengthens, you can repay the loan thanks to the current foreign exchange rate, thereby allowing you to realize an exchange profit from the secured foreign exchange position
  • How to invest in stocks?

Reduce your currency risk using a unique Fio banka product!

How does a currency loan work?

The currency the client has on his or her account serves to secure the currency loan for Fio. Currencies that can be used to secure funds are CZK, USD, EUR. A currency loan is drawn if your trading account has an insufficient cash balance in the currency used for the given trade. E.g. If a client decides to purchase securities totaling 10.000 USD and the trading account only has 6.000 USD and 100.000 CZK - a currency loan is used for the remaining 4.000 USD to borrow against the CZK balance.

It is important to realize that the currency loan does not protect any profit or loss caused by the movement of the purchased stock. For example, if a client drawns currency loan to buy stocks in the amount of 10.000 USD and these stocks will gain 10%, still only 10.000 USD will be protected and profit of 1.000 USD will not be protected by currency loan. If the client wants to convert this profit to another currency (usually its basic currency), he / she must do so for the current exchange rate.

If the client drawns currency loan to buy stock in the amount of  10.000 USD and sells these stocks after their rate drops for example for 9.000 USD, realizes a loss of 1.000 USD and in that amount client is then fully exposed to currency risk. Client has to repay the entire amount of the loan (10.000 USD) to the bank and after  the sale client has available only 9.000 USD and 1.000 USD has to buy at the current rate, which might be less advantegous than at the time of the purchase of stocks. In this case, the currency loan covered the currency risk only at 9.000 USD.

Without currency loan, the client would be exposed to the currency risk in the whole value of the investment in the amount of 10.000 USD. The currency loan thus helps significantly reduce the impact of the currency exchange rate movements on the value of the portfolio.

How can you get a currency loan?

  • Become a bank client - more information here.
  • A currency loan contract can be signed electronically using the e-Broker application in the "Contracts" section.

Loan conditions and price

  • The loan price is calculated on a daily basis on the drawn currency at the end of the trading day.
  • The interest rate is 2.00% p.a. above the reference interest rate for the borrowed currency.
  • There are no fees for originating the loan.
  • There are no fees for the exchange transaction.

Reference rates

Currencyreference rate
CZK1,25 %
USD1,25 %
EUR0,00 %

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