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What are the best practices for handling currency conversions in dimensional modeling?

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If you work with data warehousing, you know how important it is to design your dimensional models to support business intelligence and analytics. One of the challenges you may face is how to handle currency conversions, especially if you deal with multiple currencies and exchange rates. In this article, you will learn some of the best practices for handling currency conversions in dimensional modeling, such as:

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1 Choosing a reference currency

The first step is to choose a reference currency, which is the currency that you will use to store and report your facts. The reference currency should be consistent with your business requirements and expectations. For example, if you are a global company that reports in US dollars, you may want to use US dollars as your reference currency. Alternatively, if you are a regional company that operates in different countries, you may want to use a local currency as your reference currency.

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Asko Kauppinen

Principal Consultant at Ready Solutions Oy
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Each row in the financial fact tables could have a transaction source currency dimension refence and org reporting currency reference plus associated numeric value columns. One could have also conversion table covering end of month or montly average values when changing from transaction currency to the org reporting currency.

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2 Creating a currency dimension

The next step is to create a currency dimension, which is a dimension that contains the attributes of the currencies that you use in your data warehouse. The currency dimension should include the currency code, name, symbol, and other relevant information. For example, you may have a currency dimension that looks like this:

Currency Key | Currency Code | Currency Name | Currency Symbol
1            | USD           | US Dollar     | $
2            | EUR           | Euro          | €
3            | GBP           | British Pound | ￡

The currency dimension allows you to link your facts to the currencies that they are in, and also to perform currency conversions using the currency code as a key.

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3 Storing exchange rates

The third step is to store exchange rates, which are the ratios between different currencies. Exchange rates are usually time-variant, meaning that they change over time depending on the market conditions. Therefore, you need to store exchange rates in a separate table or fact table that has a date or time dimension as a foreign key. For example, you may have an exchange rate table that looks like this:

Date Key | Currency Code | Exchange Rate
20210101 | USD           | 1.00
20210101 | EUR           | 0.82
20210101 | GBP           | 0.73
20210102 | USD           | 1.00
20210102 | EUR           | 0.83
20210102 | GBP           | 0.74

The exchange rate table allows you to convert your facts from one currency to another using the date and the currency code as keys.

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4 Applying currency conversions

The final step is to apply currency conversions, which are the calculations that transform your facts from one currency to another using the exchange rates. Currency conversions can be done either at the ETL (extract, transform, load) stage or at the query stage, depending on your preferences and performance. For example, if you want to convert your sales facts from euros to US dollars at the ETL stage, you may use a formula like this: Sales USD = Sales EUR * Exchange Rate (EUR to USD) Alternatively, if you want to convert your sales facts from euros to US dollars at the query stage, you may use a formula like this: Sales USD = Sales EUR * (SELECT Exchange Rate FROM Exchange Rate Table WHERE Date Key = Fact Date Key AND Currency Code = 'EUR') By applying currency conversions, you can enable your users to view and analyze your facts in different currencies and compare them across markets and regions.

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5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Kaivalya Murthy

Group Manager, Finance Analytics and Systems at Intuit VP of Philanthropy at btc Almaden Advisory Board Member for Micro MBA program at UC Riverside
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Design should also consider - Types of currency conversions to support.. average, ending, daily, monthly, annual - balance pros and cons of currency conversion at which layer is right - source, analytics or data warehouse. - Within the data warehouse is it right to store currency converted data or dynamically generated for analysis - FX rate table should store from, to currency, date, type, value. - FX rate decimal precision - ability to add new currency with ease - data governance to define and enforce a single source of truth for currency conversion

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What are the best practices for handling currency conversions in dimensional modeling?

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5

1 Choosing a reference currency

2 Creating a currency dimension

3 Storing exchange rates

4 Applying currency conversions

5 Here’s what else to consider

Data Warehousing

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What are the best practices for handling currency conversions in dimensional modeling?

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5

1 Choosing a reference currency

2 Creating a currency dimension

3 Storing exchange rates

4 Applying currency conversions

5 Here’s what else to consider

Data Warehousing

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