Speculating on the US$

Nick_C

With the USD at a 26 year low against the £, I was thinking about putting £10K in a US$ account with the hope of getting a capital gain plus a reasonable rate of interest.

Nationwide International (a subsidiary of the BS based on the Isle of Man) is offering 5.6% gross for an initial investment of $5000. Does anyone know of a better rate?

Anyone got any thoughts on speculating on the Dollar?

Jonbvn

The spread between buying and selling US$'s will eat into any profit you make. IMHO 5.6% rate is quite good, since the federal reserve lending rate is lower than the BofE.

A lot of smart people have lost their shirts or made billions doing this. Remember George Soros? I recently read that Japanese housewives are big into currency speculation. However, they are into derivatives and buying forward positions, which I find a bit scary.

Personally, I hold a lot of US$'s since I had a contract that paid in dollars. I am waiting for the sterling to drop (as it must do eventually), to transfer into pounds. When this will happen - who knows?

Amnesia180

Jonbvn wrote: »

Personally, I hold a lot of US$'s since I had a contract that paid in dollars. I am waiting for the sterling to drop (as it must do eventually), to transfer into pounds. When this will happen - who knows?

This is a serious question - Are you sure the sterling will drop?

I recently went to S.A and it's currently (or was a couple of weeks ago) 13.25 rand to 1 GBP. They said that it isn't going to drop, only rise (because of the economy in other bordering countries).

How do we know our GBP is going to drop?

Thanks,
Amnesia

Bazn

an alternative way to benefit from a dollar rebound is to invest in dollar-denominated assets. one of the less risky options is to put money in a US Dollar bond fund (a few are available on fidelity fundsnetwork).

of course you could take bigger risks and invest in US equities or property...

Almost_Redundant

Just a thought, but does anyone know of any system where one could (legally) exchange currency with an American citizen? i.e I'm after exchanging £50k sterling so is there an American out there looking for £50k sterling? We could agree on an exchange rate and cut out the middle man therefore hopefully avoiding losses through spreads on foreign exchange. Thoughts?

Jennifer_Jane

Amnesia180 wrote: »

This is a serious question - Are you sure the sterling will drop?

I recently went to S.A and it's currently (or was a couple of weeks ago) 13.25 rand to 1 GBP. They said that it isn't going to drop, only rise (because of the economy in other bordering countries).

How do we know our GBP is going to drop?

Thanks,
Amnesia

Hi - I don't want to hijack this thread ('threadjack'?) but do you bring Rands over to the UK? If so, do you just do this via your Bank? I wondered if there were cheaper, but very safe, ways to bring over money.

Re the actual thread, for those of us who have money in other countries we know how volatile those currency markets are. High risk to my mind.

Jen

Jonbvn

Amnesia,

Of course there are never guarantees that the value of sterling will drop. Nobody ever knows for sure. The current diverse interest environments in the US & UK is causing downward pressure on the dollar. Basically interest rates have risen rapidly in the UK, with a possibility of a rate cut in the US.

From what I have read, most commentators seem to think that sterling is overvalued. Based on purchasing power parity (PPP) the equilibrium exchange rate is estimated between 1.5 & 1.7. Interestingly, the Economist uses the Big Mac parity to get a rate of 1.6!

Therefore, there are grounds for me to assume that sterling is likely to drop in value sometime in the future. However, I do not know when this will be and the extent of the drop.

Lovin_It

Spread betting is the easiest way to take a position on currency fluctuations - e.g. cityindex.co.uk

I wouldn't be so confident that it will drop though! With their trade imbalance, and the amount of paper the fed has been issuing, the likelihood is they'll print a whole lot more dollars in the future (making the pound stronger).

Caveat emptor, of course.

Jonbvn

Lovin_It wrote: »

I wouldn't be so confident that it will drop though! With their trade imbalance, and the amount of paper the fed has been issuing, the likelihood is they'll print a whole lot more dollars in the future (making the pound stronger).

I am confident that sterling will drop, but not when and by how much! Remember when the US sneezes..... Also we may be in for a correction in house prices similar to the US. Overall, a comparison between the UK and US economies, indicates that sterling is presently overvalued.

BTW, I do not have the pockets (or the b#lls) to consider spread-betting.

Amnesia180

Thanks for all the info everyone.

Jennifer_Jane wrote: »

Hi - I don't want to hijack this thread ('threadjack'?) but do you bring Rands over to the UK? If so, do you just do this via your Bank? I wondered if there were cheaper, but very safe, ways to bring over money.

Jen

Hi Jen,

Unfortunately, South Africa absolutely hate releasing their money to foreign countries.

My mother recently inherited a small sum of money from her father dieing... and it had to go through the courts to get the money sent to us. And even then, it didn't pay up. Luckily, we have South African relatives who were able to swing some roundabouts and tell them to release the money to the UK.

Only other way I can think of doing it, is to get into a travel agent and ask them to exchange the money - but then you're paying a higher exchange rate.

Hope that helps/answers your question.

If not, feel free to PM me or post another reply here.

Thanks,
Amnesia

Jennifer_Jane

Thanks, Amnesia, yes I do know about the Exchange Controls! It was more if you had experience of bringing over the money cheaply. Sounds like I will just have to bring over the money via the bank as usual. Thanks for your reply and I'm very sorry to hear about your grandfather.

I will be back in November sitting in the Tax Office waiting for permission as always. At least they have TV whilst you wait.

Thanks for replying.

Jen