It seems everywhere you turn recently, there is discussion about currency movements - the British pound falling to its lowest level against the US dollar in more than 30 years following Brexit; the volatile Australian dollar, worth more than the US dollar just a few years back, now doing a 180-degree turn; and the speculation about Federal Reserve's interest rate hike - particularly after the US presidential election - and its impact on the US dollar as well as other currencies.

How do currency movements affect me? A common reaction to currency movements is: "It does not affect me." But is that truly the case?

Take a short-term goal: When planning a holiday, for example, following Brexit, the event's impact on the pound will tell you that Britain has gone from being a relatively expensive place to go on holiday, to being a more affordable destination.

Long-term wise, paying for a child's education abroad - which is a common goal for parents in Singapore - will also be impacted by currency movements.

A study by HSBC showed that 82 per cent of parents in Singapore would consider sending their children abroad to study. Parents who know that they are eventually going to have financial commitments overseas - such as tuition fees, daily expenses and lodging costs - should be stockpiling the local currency over time and be abreast of when it is undergoing a period of weakness to accumulate further.

How do currencies impact our day-to-day lives? According to the Agri-Food and Veterinary Authority, more than 90 per cent of the food consumed in Singapore is imported. This means the cost of something as common as a plate of Hainanese chicken rice might change due to the appreciation or depreciation of the Singdollar against the currency of the country from where the chicken is imported.

As you can see, currency movements may affect you more than you think.

TAKING ADVANTAGE OF CURRENCY MOVEMENTS

Another reaction is, "I should take advantage of this", but then the thought floats away because of not knowing exactly what to do. If this is you, don't worry - you're far from being alone. So how much knowledge do you need to be financially literate in currencies? Of course, there is a wide range of things that affect currencies, but the average person can't be expected to be an expert in all of this.

The currency exchange rate is the rate at which one currency can be exchanged for another. It is always quoted in pairs like the EUR/USD (the euro and the US dollar).

The most traded currency pairs in the world are called the "majors", involving currencies such as euro, US dollar, Japanese yen, pound sterling and Australian dollar, which constitute the largest share of the forex market.

Exchange rates fluctuate based on key factors such as interest rates, political stability, economic performance as well as inflation, which affect the demand of a currency and its relative value to other currencies. These will have an impact on whether you should buy or sell a currency pair.

For example, the EUR/USD rate represents the number of US dollars one euro can purchase. If you believe that the euro will increase in value against the US dollar, you will buy euros with US dollars. If the exchange rate rises, you will sell the euros back, making a profit.

For consumers or spenders of a foreign currency such as those planning for an overseas holiday or paying housing loans or for their child's education in a foreign country, you should buy on dips - that is, whenever the currency in which you have expenses drops, use that as an opportunity to buy, via simple online tools for convenience.

For investors who intend to generate returns through foreign currency denominated bonds or unit trusts, it is important to have access to regular updates on the forex market from financial institutions. You should also consider other currency-linked investments to diversify your currency holdings.

RISKS ASSOCIATED WITH CURRENCY TRADING

Trading forex carries a high level of risk, and may not be suitable for everyone and you could sustain a significant loss on your investment.

To stay within your own lanes of safety, one option is to regularly keep an eye on the currency and buy it when it reaches a favourable rate.

This can be done by setting up automatic online instructions with your currency broker or financial institution that can monitor exchange rates and convert funds on your behalf when the currency hits a preferred rate.

Diversification also serves to spread out your risk. Having a basket of currencies over a longer- term horizon can help reduce volatility as the positive strength of a currency will neutralise the negative weakness of others.

Do carefully consider your investment objectives, level of experience and risk appetite. If you have any doubts, it is advisable to seek help from professional financial advisers.

• The writer is head of wealth development, retail banking and wealth management at HSBC Singapore.