Continued...

It seems that yesterday's post, far from clarifying matters, just confused people, so let's see whether we can make things clearer.  Let's suppose.for the sake of argument, that the dollar and the pound are trading at parity - so a dollar buys a pound, and a pound buys a dollar - OK?  Now let's suppose that you are a company trading on the FTSE working in dollars and this week you have made a profit of $100,000.  The FTSE record this as a profit of £100,000.  With me so far?  Now supposing next week you tread water - so once again you make a profit of $100,000.  But in the interim, the pound has weakened against the dollar. It's now only worth 98 cents - which means that a dollar is now worth £1.02 (I'm rounding and ignoring commission and such).  So as far as the FTSE is concerned, your profit this week is £100,200 - 2% better than last week even though as far as you are concerned it's exactly the same.  All down to a change in the exchange rate.  You see how it works?