I'm currently in the situation that most of you probably were about 4-5 years ago. The currency of my home country (UK) has been pretty strong for a number of years, but lately I've become increasingly bearish on the prospects. So, I was considering getting into other currencies to reduce my exposure to a large decline in the pound. I have a fairly strong conviction on this. My question is what % of total assets is it prudent to place abroad? I could just go 100% long a basket of foreign currencies, but then if I am wrong and sterling rallies 20%, I have suffered a major capital loss. Also I have to consider that my expenses and tax bills are in sterling too. I consider the potential risk if I'm wrong to be a move back to the old highs - that's about 7-10% risk vs the dollar and Euro. I'd be interested in anyone's opinions, especially people who tried hedging against the dollar's decline in recent years. What size forex/gold position did you have, did you find it easy or difficult to sit out the volatility, did you have any method of when to get out etc (e.g. a stop).
How about a long CAD/GBP position? If oil keeps going up this should help boost the CAD. Canada has lots of oil and other resources, such as coal, potash, copper, aluminum.
Cutten You might want to consider posting your queries over at Oanda's forum which is frequented by a number of experienced FX traders whose base currency isn't USD. Happy hedging!
Why not go long EUR-GBP? It would be better with futures, altough I'm not sure if EUR-GBP futures are liquid enough. You need to calculate leverage so that you are inline with the money you have in your account.