Higher savings rates abroad

SuperHan

Interest rate parity means theoretically exchange rate differences over time will wipe out any additional gain from higher interest rates. There is an element of risk to this, which could lead to you making bigger gains or losing out big time, but over a long enough period of time, the theory is that it will make no difference at all.

Jonbvn

Archi_Bald wrote: »

That's of course not true, as you know.

Good joke though.

I'm anticipating good rates on the drachma when it eventually reappears.;)

Plus

SuperHan wrote: »

Interest rate parity means theoretically exchange rate differences over time will wipe out any additional gain from higher interest rates. There is an element of risk to this, which could lead to you making bigger gains or losing out big time, but over a long enough period of time, the theory is that it will make no difference at all.

Yes. And if it wasn't the case the arbitrageurs would jump on the opportunity to trade one off against the other. If they did that, say everybody bought rupees because they thought it was a good deal to save in rupees, the exchange rates would move to counteract the potential arbitrage - rupees would get more expensive and there would be no profit to be made (after short-term noise). Bottom line is: the market has already seen you coming and priced in any loophole you might have found, because that's what markets do.