Saving in a different country?

ride165

Hi all, I've recently moved to New Zealand, not sure how long I'm staying could be perm or it could be until the UK recovers. I've been keeping a keen eye on the UK economy and have read that the BOE plans to drop interest rates again! Unbelievable! So as a saver I'm going to get even less on my savings. I have 9k stashed away earning a measily 2.55% so I though about transfering my money over here and saving in NZ$'s instead of UK£'s.

With a Kiwi Bank PIE Investment
$25000 (£9k) over 120 days @ 4.00% p.a. with a PIR rate of 30% p.a.
Estimated net return $230.14 (£81)

opinions4u

There are three things to consider:

1) What is the medium outlook for interest rates in both countries? - if rates are forced down in New Zealand (likely) or rise in the UK (unlikely short term, likely medium term - unless we are modeling a Japanese style recession) then any gain is restricted and could ultimately be a loser.

2) Cost of converting the currency. With a buy/sell spread you could lose a significant chunk of your money just for changing it from sterling to NZ$.

3) Changes in currency values - as the NZ economy slides I'd expect the £ to buy more NZ$. Action now may secure you a better rate of interest, but obtain you fewer NZ$.

Of course, if you get really lucky you might be able to exchange the money on the cheap, lock in at a relatively high rate and have exchange rates react favorably to you.

I think slightly more likely is you lose a chunk of your capital changing it, get in to a rate that falls as UK rates begin to bounce and see the value of your capital erode against sterling as exchange rates screw you.

What would I do?

Keep my savings in the country I'm going to live in long term.

gozomark

Kiwi v £ - the volatility of this makes a couple of % difference in interest rates largely irrelevant

http://fx.sauder.ubc.ca/cgi/fxplot?b=NZD&c=GBP&rd=*&fd=1&fm=1&fy=2000&ld=31&lm=12&ly=2009&y=daily&q=volume&f=png&a=lin&m=0&x=