Can You Buy Foreign Currency at Fidelity? A Comprehensive Guide to Currency Trading and International Investments

When it comes to diversifying investment portfolios, many investors look beyond domestic stocks and bonds to global markets. One option that frequently comes to mind for seasoned traders and investors is foreign currency trading, also known as forex trading. However, if you’re using Fidelity Investments for your trading and investment needs, you might be wondering, “Can I buy foreign currency at Fidelity?”

Fidelity, known for its extensive investment options in stocks, mutual funds, ETFs, and retirement accounts, might not immediately come to mind for forex trading. But in this blog, we’ll dive deep into whether you can purchase foreign currency through Fidelity, the various ways you can invest internationally, and how you can get exposure to the currency markets without directly trading foreign currencies.

By the end of this article, you’ll have a better understanding of the options available for investing in foreign currencies through Fidelity, the potential alternatives, and how you can expand your international investment opportunities.

Can You Buy Foreign Currency Directly at Fidelity?

The short answer is no — you cannot directly buy foreign currencies like Euros, Yen, or British Pounds at Fidelity in the way you would buy stocks or bonds. Fidelity does not offer a direct foreign exchange (forex) trading platform for retail investors, which means you won’t be able to trade currencies like you can trade stocks or commodities.

Fidelity provides a wide array of investment vehicles, but direct forex trading, where you would buy and sell foreign currency pairs (such as EUR/USD or GBP/JPY), is not available through their trading platform.

However, this doesn’t mean that you’re completely out of luck if you’re interested in gaining exposure to foreign currencies. There are alternative ways you can still participate in international currency markets or gain indirect exposure to the movements of foreign currencies through Fidelity.

Let’s explore the alternatives available at Fidelity that allow you to indirectly invest in foreign currencies and gain exposure to international markets.

Alternative Ways to Gain Exposure to Foreign Currency at Fidelity

While you can’t directly trade foreign currency pairs on Fidelity, there are still ways to get involved in global currencies and benefit from currency fluctuations. Here are some alternatives:

1. Currency ETFs (Exchange-Traded Funds)

One of the easiest and most accessible ways to gain exposure to foreign currencies on Fidelity is through currency exchange-traded funds (ETFs). These ETFs are designed to track the performance of specific currencies or baskets of currencies relative to others, allowing you to invest in a foreign currency without directly buying it.

Some popular currency ETFs include:

• Invesco CurrencyShares Euro Trust (FXE): This ETF tracks the value of the Euro (EUR) relative to the US Dollar (USD). It’s an excellent option if you believe the Euro will strengthen against the Dollar.

• Invesco CurrencyShares Japanese Yen Trust (FXY): This ETF tracks the value of the Japanese Yen (JPY) against the US Dollar.

• WisdomTree Bloomberg U.S. Dollar Bullish Fund (USDU): For those looking to invest in the US Dollar and bet on its strength against a basket of global currencies, this fund provides an opportunity.

• SPDR Bloomberg Barclays Emerging Markets Local Bond ETF (EBND): Although not specifically focused on currency, this ETF gives exposure to emerging market bonds, which can be impacted by fluctuations in local currencies.

You can purchase these currency ETFs through Fidelity’s brokerage platform, just like any other stock or ETF. Currency ETFs are a convenient option for retail investors who want to hedge against currency risk or profit from currency movements without engaging in complex foreign exchange trading.

2. Foreign Currency Mutual Funds

In addition to currency ETFs, Fidelity also offers mutual funds that focus on international and emerging markets, where currency fluctuations can play a significant role in investment returns. These funds might not directly invest in foreign currencies, but their performance is influenced by changes in currency exchange rates.

For example:

• Fidelity International Index Fund (FSPSX): This fund provides exposure to international stocks from various developed countries. Currency movements between the US Dollar and foreign currencies will impact the returns of the fund.

• Fidelity Emerging Markets Fund (FEMKX): This fund invests in companies located in emerging markets, and its performance can be influenced by currency exchange rates between the US Dollar and local currencies in these markets.

While these funds don’t directly invest in foreign currencies, they can still provide indirect exposure to currency movements through the companies and bonds they hold. These funds are ideal for those looking to invest internationally but prefer the convenience of mutual funds rather than directly trading currencies.

3. International Stocks and Global Companies

Another way to get exposure to foreign currencies through Fidelity is by investing in international stocks or global companies that generate a significant portion of their revenue from outside the United States. The performance of these companies can be impacted by currency fluctuations, especially if they operate in regions where currencies are volatile.

Some examples of international stocks and global companies include:

• Alibaba Group (BABA): A Chinese e-commerce giant that operates primarily in China, its stock price can be affected by changes in the value of the Chinese Yuan (CNY) against the US Dollar.

• Nestle (NSRGF): A Swiss multinational food company whose revenues come from various international markets, Nestle’s stock can be impacted by the value of the Swiss Franc (CHF) relative to other currencies.

• Royal Dutch Shell (RDS.A): This oil company generates a large percentage of its revenue from oil sales in foreign markets, so currency fluctuations between the US Dollar and other currencies (like the Euro (EUR) or British Pound (GBP)) may impact its earnings.

Investing in international stocks through Fidelity gives you indirect exposure to currency risk and rewards, and it may be a simpler option for those who want to diversify their portfolios with foreign assets.

4. Forex Trading Through Third-Party Platforms

While Fidelity does not provide a direct forex trading platform, it’s still possible to trade foreign currencies through third-party forex brokers. These brokers specialize in currency trading and provide a platform where you can buy and sell currencies.

Popular forex trading platforms that integrate with Fidelity accounts include:

• OANDA

• Interactive Brokers

• IG Group

• Forex.com

You can fund your forex trading account through your Fidelity brokerage account by transferring funds. While this option may involve opening a separate account with a third-party forex broker, it allows you to engage directly in forex trading.

Make sure to thoroughly research and select a reputable broker, as forex trading comes with high risks due to the volatility of currency markets.

5. Forex Options and Futures

For advanced traders looking for more sophisticated ways to trade currencies, foreign currency options and futures contracts are also available. These financial instruments allow investors to bet on the future price movements of specific currencies.

Fidelity offers access to futures contracts through its Fidelity Futures Trading platform, and although they don’t directly offer forex options, you can trade foreign currency futures (such as EUR/USD futures) to gain exposure to the movements in foreign exchange rates. Futures contracts are typically for more experienced traders due to the high leverage involved.

Risks of Investing in Foreign Currency

While investing in foreign currencies through these alternative methods can be a profitable strategy, it’s essential to understand the risks associated with currency investing:

1. Volatility: Currency markets are highly volatile, and fluctuations in exchange rates can result in substantial losses.

2. Geopolitical Risk: Political instability, trade wars, and economic changes can all impact currency values.

3. Leverage: Some currency trading methods (such as forex futures) allow the use of leverage, which can amplify both potential profits and losses.

Conclusion

In summary, Fidelity does not offer direct forex trading for retail investors, but there are still many ways to gain exposure to foreign currencies through alternative investment vehicles like currency ETFs, foreign currency mutual funds, international stocks, and third-party forex brokers.

If you’re looking to hedge against currency risk or speculate on currency movements, consider using one of these investment options available through Fidelity. As with any investment, it’s crucial to understand the risks involved and ensure that you’re comfortable with the potential for both gains and losses.