What Is a Base Currency? Tracking Multi-Currency Portfolios

When Turkish lira cash, dollar-denominated stocks, euro savings, and gold by the gram are held in the same portfolio, it is not possible to simply add their amounts together. Each item must be converted to a common unit of measurement. The base currency serves as a reference that allows you to view the different currencies in your portfolio in a single reporting language. When tracking a multi-currency portfolio, the total value, distribution, and changes are reported in this currency; however, the amounts of the assets in their original currencies are preserved.

What is the base currency?

The base currency determines which currency is used to display totals and charts in your financial overview. For someone living in Turkey who pays most of their expenses in TL, this currency is typically the TL. Someone whose income is in euros, whose financial goals are in euros, or whose future expenses are in another currency may choose a different reference currency.

The base currency does not mean that all assets are actually converted to that currency. For example, 2,000 USD in your account remains 2,000 USD; it is simply converted to TL, EUR, or another base currency at the selected exchange rate when calculating the grand total. This ensures that the original amount and the reported value do not get mixed up.

Why is a single reference currency necessary?

Listing 1,000 USD, 500 EUR, and 50,000 TL side by side is useful for inventory purposes; however, it does not provide the total portfolio value. Using a common unit makes it easier to answer the following questions:

• What is the approximate total of the portfolio in its base currency?
• What is the share of each asset class in the total?
• Which category accounts for the change compared to the previous period?
• What percentage of the total is attributable to foreign currency exposure?
• How does the amount accumulated toward a specific goal measure up in this common unit?

Percentages cannot be calculated correctly without a common reference. A pie chart created by leaving the dollar amount in TL and the gold amount in grams is meaningless because it compares different units of measurement.

How is the base currency selected?

When making a choice, one must consider not only citizenship or country of residence but also the actual flow of financial life. The following criteria serve as a guide:

1. Income currency: In which currency are salaries or regular income received?
2. Expense currency: In which currency are rent, bills, and daily living expenses incurred?
3. Financial goal: What currency is the cost of your goal—such as a home, education, or travel—denominated in?
4. Reporting habits: In which currency do you find it easier to interpret financial figures?
5. Long-term plan: Will the country or income currency change in the near future?

For most people, the currency in which income and expenses are predominantly denominated is a practical choice. If you have multiple important goals, you can keep the main view in a single currency while tracking the goals separately in their own currencies. Since changing the main currency frequently can make period-to-period comparisons difficult, you should note the date of the change.

How is a multi-currency portfolio calculated?

The quantity of each asset is first determined in its own currency. Then, the exchange rate on the selected valuation date is used:

Value in the base currency = Value in the original currency × Exchange rate

For example, if the base currency is TL, the amount in your account is 1,000 USD, and the reference exchange rate used is 40 TL, the reported value is 40,000 TL. Additionally, if the reference exchange rate for 500 EUR is 46 TL, 23,000 TL is added. The total reported value for these two items is 63,000 TL; however, the original balances of 1,000 USD and 500 EUR are retained.

Situations Requiring Cross-Rates

If the base currency is EUR and an asset denominated in USD is being tracked, the direct USD/EUR exchange rate can be used. When a direct rate is not available, the two currencies can be converted using a common reference rate. It is important that the conversion chain and the timing of the rates are consistent; otherwise, minor discrepancies may arise in the total.

Which exchange rate should be used?

There is no single universal “correct exchange rate.” Financial institutions’ buy and sell rates, official references, and market averages may vary. The key requirement in portfolio tracking is that the approach used be clear and consistent.

• Reference or mid-market rate: This can provide a simple approach for general valuation and period-to-period comparisons.
• Buy rate: May be closer to the estimated amount you would receive when exchanging currency.
• Selling rate: May reflect the approximate cost of buying new foreign currency.

The exchange rate spread, commissions, and trading hours affect the actual conversion result. Therefore, the amount shown on the tracking screen is not the exact amount you would receive from selling or the exact amount you would pay for buying. When comparing different days, it makes more sense to use the same exchange rate type and a similar valuation time.

Distinguishing Currency Fluctuations from Investment Performance

The value of a foreign-currency investment in the base currency depends on two factors: the asset’s own price and the exchange rate. For example, if a dollar-denominated fund declines by 3 percent but the USD/TL exchange rate rises at a higher rate, the fund may appear to have gained value in TL terms. This does not mean the fund has generated a return in dollar terms.

Therefore, if possible, consider all three values together:

• The change in the asset’s price in its original currency
• The change in the relevant exchange rate
• The total change converted to the base currency

New deposits and withdrawals should also be distinguished from performance. Adding 1,000 USD to the portfolio increases the total, but this increase is not investment return. Consistent record-keeping distinguishes savings contributions from market movements.

How are gold and physical assets converted?

Gold is first valued by multiplying the quantity by the applicable unit price, then converted to the base currency if necessary. For physical gold, the actual redemption amount may differ from the theoretical price due to fineness, labor costs, and the bid-ask spread.

The value of physical assets such as homes and vehicles is an estimate manually entered by the user. If you entered an estimate in a foreign currency, it can be converted to the base currency during reporting. biriqim does not provide real-time property or vehicle valuations and does not verify title deeds; these records do not serve as substitutes for appraisals or final sale prices.

What happens when you change the base currency?

Switching the base currency from TL to EUR does not change the actual asset amounts; it only changes the currency in which the totals are presented. However, the comparison method used in historical charts is important. The results will differ depending on whether historical values are recalculated using that day’s exchange rates or converted using today’s rates. Knowing which method is used prevents misinterpretation.

biriqim helps you view assets in different currencies together in your selected base currency and track their distribution. It is solely a tracking and analysis tool; it does not convert currency, execute transfers, or perform transactions on your behalf.

Frequently Asked Questions

Is it mandatory to select the Turkish Lira (TL) as the base currency?

No. You can choose any supported currency that makes sense based on your income, expenses, and goals. The important thing is to use a consistent reference across time periods.

Does changing the base currency result in a gain or loss?

No. Only the reporting unit changes; the actual asset amount and transaction history remain the same. The numerical display on the screen varies due to the exchange rate.

Why doesn’t the amount in the foreign currency account exactly match the TL equivalent on the screen?

The exchange rate’s timing, buy/sell direction, spread, and fees may vary. The reference value used for tracking provides an approximate report; it does not have to match the bank’s actual conversion quote.

Simplify your multi-currency view

Explore biriqim’s features to understand your primary currency and portfolio view. Download biriqim to start creating your own records.

Disclaimer: This article is for general informational purposes only; it is not investment or foreign exchange trading advice. Exchange rates and physical asset equivalents may be estimates.