How do foreign exchange rates impact my wine portfolio?

Most fine wine is transacted in British pounds. This means that most Vinovestors must convert their native currency into pounds to invest in fine wine. As a result, portfolios can move up and down in value for two reasons: 1) the wine gains or loses value, and 2) the native currency gains or loses value in relation to the pound.

Here’s an example. In 2022, the British pound weakened against the US dollar. At the start of the year, £100 was worth $140. By May, that same £100 was only worth $126. Put another way: the value of the pound had dropped 10% in comparison to the dollar.

So how does that impact wine investing? Let’s say you live in the United States. You purchase a bottle of fine wine for $140 at the beginning of 22. (Remember that purchase is made in British pounds.) Five months later, your wine has risen 5% in value. However, those gains are offset by the fact that the pound has weakened by 10%.

There are a couple of things to note here. First, foreign exchange rates present an opportunity for those savvy enough to look for it. In this example, the dollar’s increasing strength means American Vinovestors got more wine for their dollar in May than they could have in January. Second, this example could happen in reverse. The pound could strengthen in relation to the dollar, and the Vinovestor would enjoy a classic win-win situation.

To learn more about how foreign exchange rates impact your portfolio, check out our blog post What the Weakening Pound Means for Your Wine Portfolio.