Policy clause
"Foreign currency exposure no more than 30%": how to write it, test it and evidence it
A foreign-currency cap limits the share of the portfolio outside the base currency. Acclimetry's currency exposure template bands named currencies one by one; it has no all-foreign-currencies total. For an unhedged book, the clause equals a sterling floor of 70%, which one band can express.
Exposure to currencies other than sterling may not exceed 30% of the portfolio.
currency_exposureQuestions to settle before it can be tested
- Hedged or unhedged: is the 30% after hedging? If so, measure hedges separately with a hedge ratio, which reads forward notionals.
- Denomination or economic: a dollar-priced share may carry another currency's risk. The template can read either basis, the economic one from a governed field.
- Netting across currencies: does a short yen position offset long dollars? A sterling floor reads the net.
- Holdings without a currency make every band not evaluated, so cash and funds need one.
As a testable rule
Currency exposure template, one band: GBP with hard minimum 70% and warning minimum 72%, on the denomination basis. Every position must carry a currency. To cap a single foreign currency as well, add its own band, such as USD at a hard maximum of 20%.
A testable wording and where it stops
Holdings denominated in sterling must make up at least 70% of the portfolio's market value, so that other currencies are at most 30%. Currency forwards are measured separately.
If the 30% is after hedging, the floor overstates foreign exposure, because a forward's sterling side is not a sterling holding. Pair it with a hedge ratio; the currency exposure bands page shows the per-currency form.
Worked example
Sterling holdings are 4.08m of 6m, 68%, under the 70% floor: foreign currencies are 32%, two points over the clause.
Rule template:currency_exposure bands: currency=GBP, hardMin=70, warnMin=72
| Holding | Class | Currency | Market value |
|---|---|---|---|
| UK equities | Equities | GBP | 1,800,000 |
| UK Treasury 3.25% 2033 | Government bonds | GBP | 1,980,000 |
| Sterling cash | Cash | GBP | 300,000 |
| US equities | Equities | USD | 1,200,000 |
| European equities | Equities | EUR | 540,000 |
| Japanese equities | Equities | JPY | 180,000 |
| Group | Status | Value | Bounds | Headroom to the hard bound | Code |
|---|---|---|---|---|---|
| GBP | Breach | 68% | ≥ 70% warning ≥ 72% | -2% -4% to warning | BELOW_HARD_MINIMUM |
BELOW_HARD_MINIMUM: The measured value falls below the approved hard minimum, beyond any stated tolerance.
Largest contributors: GBP → UK Treasury 3.25% 2033 33%, UK equities 30%, Sterling cash 5%
Computed at build time by the Acclimetry rule engine (backend commit 8197063); the same code runs in the product.
What each monitoring run records
Each run stores the sterling weight, its state, headroom and the largest sterling holdings; the foreign share is 100% less that weight. Bands for named currencies add their own rows. A breach opens a case like any other limit.