Currency risk: how the euro-dollar rate changes your investment return

US shares and dollar funds are taxed on the gain in euro, so a stronger euro cuts both your return and your tax. How to see the effect on Capital Gains Tax.

When you buy shares or a fund priced in dollars, you are making two bets: on the investment, and on the exchange rate. If the euro strengthens while you hold it, each dollar is worth fewer euro when you sell, and part of the gain disappears.

Tax is worked out in euro

For Capital Gains Tax (CGT), the gain is the euro value of what you sold for less the euro value of what you paid. Each is converted at the rate on the day (Tax and Duty Manual 19-01-14a). So the currency move is part of your taxable gain or loss. A share that rose in dollars can produce a loss in euro, and the reverse.

An example

You convert €10,000 to dollars at 1.1500 dollars per euro, getting $11,500, and invest it in US shares that grow 6% a year in dollars. After 5 years you sell and convert back. What you get depends on the rate then:

CGT is 31% of the euro gain after the €1,270 annual exemption. Dividends are left out. A stronger euro, from 1.1500 to 1.2500, takes €1,070.58 off the value. The euro would have to reach 1.5390 dollars before the whole gain was gone.

Holding dollars counts too

Foreign currency is itself an asset for CGT. Dollars left in a broker or bank account between trades can make a gain or loss in euro when you spend, convert or withdraw them. It is worked out the same way.

Ways to manage it

• Currency-hedged fund classes remove most of the exchange rate effect, at a cost. The cost is usually built into a higher charge and the interest rate difference between the currencies.
• Spread. Holding investments in several currencies, or mostly in euro, limits how far one exchange rate can move your result.
• Records. Keep the rate used on each purchase and sale. Revenue expects you to show the euro cost and euro proceeds for every disposal.

To try other rates, returns and amounts, use the exchange rate impact calculator.

Work it out

• What the dollar does to your US shares →
• Share investment growth, after Irish tax →

Sources

• Revenue: Tax and Duty Manual Part 19-01-14a: gains computed by reference to the euro values of the purchase price and the sale proceeds (checked 16/10/2026)
• Revenue: How to calculate CGT (checked 25/10/2026)
• Revenue: eBrief No. 142/26: CGT standard rate reduced to 31% from 7 October 2026 (checked 25/10/2026)

General information, not tax advice. HeyPenny is not a tax agent.