Foreign currency accounts: when to open a USD, GBP or CNH account
A currency account removes conversions, but creates an FX position that has to be managed. The four-question test that tells you whether it is your case, and the rules to set the day it opens.
A foreign currency account is neither an automatic optimisation nor a gimmick. It is a tool that solves one precise problem — unnecessary conversions — and creates another: a permanent FX position. The trade-off turns on the structure of your flows, not on the principle.
The four-question test
- 1Do you have inflows AND outflows in the same currency?
This is the decisive question. If you collect USD 2 million and pay out USD 1.4 million a year, a dollar account removes USD 1.4 million of round-trip conversions. If you only have inflows, the case is much weaker.
- 2Do the amounts justify the account fees?
A currency account carries maintenance fees and sometimes transaction charges. Below a few hundred thousand euros of annual flow in the currency, the conversion saving does not always cover them.
- 3Can you carry a currency balance on your balance sheet?
A currency balance is revalued at each closing. A 5 % move on an average balance of USD 800,000 produces a translation difference of USD 40,000 in financial income. That is not a problem if it is anticipated; it is one if it is discovered in the closing meeting.
- 4Do you have a written conversion rule?
Without a rule, the currency balance becomes a dormant speculative position: you convert when you happen to think of it, which is often when the rate is poor, because that is when it comes to mind.
Two yes answers to the first two questions are enough to open the account. The last two do not determine the decision: they determine how the account is managed once open.
What the account saves, quantified
| Without a USD account | With a USD account | |
|---|---|---|
| Receipts of USD 2m | Converted USD→EUR | Credited in USD, no conversion |
| Payments of USD 1.4m | EUR→USD conversions as payments fall due | Paid from the balance, no conversion |
| Volume converted | USD 3.4m | USD 0.6m (the net balance) |
| FX margin paid | On USD 3.4m converted | On USD 0.6m converted |
The rules to set the day the account opens
- A target balance: the amount in the currency you accept holding permanently, sized on the coming weeks' payments.
- A tolerance band around that balance: above the cap, you convert the excess; below the floor, you top it up. Decisions become mechanical instead of discretionary.
- A review frequency: weekly or fortnightly, aligned with the update of the cash forecast.
- A treatment for lasting surpluses: if the balance stays above the cap, the question is no longer conversion but investment in the currency.
The renminbi case: CNH rather than CNY
For China, the question comes with a choice of market. The renminbi trades in two forms: CNY, onshore, subject to Chinese exchange controls, and CNH, offshore, freely traded out of Hong Kong. A renminbi account opened in Europe is a CNH account.
The two rates are not identical and can diverge noticeably in stressed periods. A Chinese supplier invoicing in CNY and an account funded in CNH create a residual gap that is worth knowing before committing to a price.
The accounting point to watch
Currency balances are translated at the closing rate, and the difference goes to financial income — an unrealised FX gain or loss. On sizeable balances this introduces volatility into earnings that has nothing to do with the business. Two answers exist: keep target balances low, or match the balance against debt in the same currency, which neutralises the difference on the balance sheet.
Structure your flows by currency
The ELEGG review maps your inflows and outflows by currency and identifies the conversions you can avoid.
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Frequently asked questions
The questions finance departments ask most often on this topic
Can a French company open a dollar account in France?
Yes, with no particular formality. Most French banks offer accounts in the major currencies, and specialist payment institutions often offer a wider range, including secondary currencies that traditional banks do not cover.
Does a currency account create additional FX risk?
It moves the risk rather than increasing it. Without a currency account, every flow is converted on arrival, at the day's rate, passively. With an account, the balance is exposed but conversion becomes a dated decision. The risk is more visible, therefore manageable — provided a target-balance rule exists.
One account per currency or a multi-currency account?
So-called multi-currency offerings are in fact sub-accounts per currency, which is the right structure. What matters is that each currency has its own balance and its own statement: a consolidated display in euros, automatically converted, loses precisely the information you need in order to decide.
Can the balance of a currency account be invested?
Yes, through a term deposit denominated in that currency, available at most institutions in the major currencies. The return follows short-term rates in that currency, which may be higher or lower than euro rates — an element to factor into the trade-off between holding the currency and converting it.
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