Why can a foreign investment rise locally but fall in your home currency?

Write the currency units first

Investor.gov notes that exchange-rate changes can increase or reduce the home-currency result of international investments. The practical calculation starts by choosing the reporting currency and writing the quote in words, not relying on an ambiguous currency pair.

Call the fictional home unit H and foreign unit F. Quote the rate as H per one F. A move from 1.00 H/F to 0.90 H/F means each F converts into fewer H. The same move expressed in the inverse quotation would have a different numerical percentage.

Work a local gain with a currency decline

Begin with 1,000 H and exchange at 1.00 H/F, obtaining 1,000 F. Assume the invented investment rises 10% in F over one period, with no distributions. It is now worth 1,100 F. If the ending exchange rate is 0.90 H/F, conversion gives 990 H.

The local-currency result is +10%, while the home-currency result is 990 ÷ 1,000 − 1 = −1%. Neither statement contradicts the other. They measure the same stipulated position in different units.

Multiply gross factors rather than adding percentages

The formula for this simple no-cash-flow case is (1 + local return) × (ending H/F rate ÷ starting H/F rate) − 1. Here it is 1.10 × 0.90 − 1 = −1%. Adding +10% and −10% would incorrectly give zero.

For a separate invented case, let the ending rate be 1.10 H/F. The same 1,100 F converts to 1,210 H, giving a +21% home-currency result. The extra percentage point beyond 10% + 10% follows from multiplying the growth factors, not a separate cash payment.

As a units check, multiply foreign units by home units per foreign unit: F × H/F leaves H. If the units do not cancel to the reporting currency, check the quotation before trusting the percentage.

Check what the translation excludes

Both cases assume one opening conversion and one ending valuation with no intermediate flows, fees, spreads, taxes, or hedges. If a distribution is converted at another date, it needs that date’s stipulated rate. If the investment is hedged, the hedge’s own cash flows and costs require a separate calculation.

Do not infer underlying currency exposure solely from the currency in which a product’s price is displayed. For a real comparison, inspect the product’s holdings, currency treatment, and reported return basis. The example supplies none of those product-specific facts.

Method, sources, and limits

All currencies, rates, and investment changes are invented; calculations were checked with decimal arithmetic. Investor.gov’s international-investing page was opened on 26 October 2026. No current exchange rate, country, asset, or forecast was used. The worksheet explains reporting-currency mechanics, not a reason to buy, sell, or hedge. A result translated into one currency is not automatically comparable with a return reported on a different fee or distribution basis.