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  • FIRST POST
    • AzzaLT
    • By AzzaLT 14th Sep 18, 11:52 PM
    • 1Posts
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    AzzaLT
    Going abroad for 2/3 years. How to protect against currency fluctuations? Can save 14K/20K
    • #1
    • 14th Sep 18, 11:52 PM
    Going abroad for 2/3 years. How to protect against currency fluctuations? Can save 14K/20K 14th Sep 18 at 11:52 PM
    First time poster here. Iím sorry if this is in the wrong section. My knowledge in Finance is limited so Iím hoping for some help from more experienced people.

    I will be graduating university next year and plan on going to Asia (China and S.Korea) for two years, at a maximum of three. I have done a lot of research on how much I can earn as a fresh graduate and have asked people who have gone there how much theyíve saved. If I lived a modest lifestyle I can save £20K over two years. The end goal is to buy my first property in my local area (South Wales). Compared to the rest of the U.K we have very cheap housing so a 20K deposit might be enough.

    In China, I will need to open a Chinese bank account and they have restrictions on how much you can send out of the country per year. I would like to know how I can protect myself from potential currency fluctuations and if you have any advice where to stash the cash on a consistent basis (monthly). ISAs are a no go as I wonít be a tax resident. International bank account?

    Thank you for reading this as I know itís hypothetical right now, but I am serious about pursuing these goals of mine. Iíd just like to know what my options are for the near future.
Page 1
    • AnotherJoe
    • By AnotherJoe 15th Sep 18, 1:16 AM
    • 10,589 Posts
    • 12,120 Thanks
    AnotherJoe
    • #2
    • 15th Sep 18, 1:16 AM
    • #2
    • 15th Sep 18, 1:16 AM
    How much can you send out? You'd only be sending £1k a month. Is that outside the limits?
    • FatherAbraham
    • By FatherAbraham 15th Sep 18, 11:43 AM
    • 870 Posts
    • 638 Thanks
    FatherAbraham
    • #3
    • 15th Sep 18, 11:43 AM
    • #3
    • 15th Sep 18, 11:43 AM
    First time poster here. Iím sorry if this is in the wrong section. My knowledge in Finance is limited so Iím hoping for some help from more experienced people.

    I will be graduating university next year and plan on going to Asia (China and S.Korea) for two years, at a maximum of three. I have done a lot of research on how much I can earn as a fresh graduate and have asked people who have gone there how much theyíve saved. If I lived a modest lifestyle I can save £20K over two years. The end goal is to buy my first property in my local area (South Wales). Compared to the rest of the U.K we have very cheap housing so a 20K deposit might be enough.

    In China, I will need to open a Chinese bank account and they have restrictions on how much you can send out of the country per year. I would like to know how I can protect myself from potential currency fluctuations and if you have any advice where to stash the cash on a consistent basis (monthly). ISAs are a no go as I wonít be a tax resident. International bank account?

    Thank you for reading this as I know itís hypothetical right now, but I am serious about pursuing these goals of mine. Iíd just like to know what my options are for the near future.
    Originally posted by AzzaLT
    If you want to minimize exposure to currency fluctuations, then convert your savings to sterling soon as you get your monthly pay.

    You may find that managing a UK bank account while not being resident is more difficult than you would imagine.
    • FatherAbraham
    • By FatherAbraham 15th Sep 18, 12:04 PM
    • 870 Posts
    • 638 Thanks
    FatherAbraham
    • #4
    • 15th Sep 18, 12:04 PM
    • #4
    • 15th Sep 18, 12:04 PM
    First time poster here. Iím sorry if this is in the wrong section. My knowledge in Finance is limited so Iím hoping for some help from more experienced people.

    I will be graduating university next year and plan on going to Asia (China and S.Korea) for two years, at a maximum of three. I have done a lot of research on how much I can earn as a fresh graduate and have asked people who have gone there how much theyíve saved. If I lived a modest lifestyle I can save £20K over two years. The end goal is to buy my first property in my local area (South Wales). Compared to the rest of the U.K we have very cheap housing so a 20K deposit might be enough.

    In China, I will need to open a Chinese bank account and they have restrictions on how much you can send out of the country per year. I would like to know how I can protect myself from potential currency fluctuations and if you have any advice where to stash the cash on a consistent basis (monthly). ISAs are a no go as I wonít be a tax resident. International bank account?

    Thank you for reading this as I know itís hypothetical right now, but I am serious about pursuing these goals of mine. Iíd just like to know what my options are for the near future.
    Originally posted by AzzaLT
    Theoretically, you could borrow enough reminbi now to buy twenty thousand British pounds, locking your conversion rate. Then as you work in China, you repay the reminbi loan. you earn.

    I have no idea whether this is possible or practical at the twenty-thousand pounds level
    • mark88man
    • By mark88man 15th Sep 18, 12:52 PM
    • 3,229 Posts
    • 6,721 Thanks
    mark88man
    • #5
    • 15th Sep 18, 12:52 PM
    • #5
    • 15th Sep 18, 12:52 PM
    so why protect - its a 2 way street sterling could go up or down against other world currencies

    if sterling weakens against the yuan you will be better off saving in Yuan. As of 1/1/18 it is was 8.8/£ as of Friday it was 8.9/£ and not massively volatile.

    with the brexit shock and transition period to get through my worries would be more about UK depreciation than Chinese.

    You will probably save more by ensuring you use the cheapest service you can for FX transfers than by hedging one way or the other. Possibly bundle up a few months at a time, whilst staying within any limits.

    If you are working for a multinational you should get their advice. If working for yourself then you will need to do that research

    excellent plan by the way
    Things happen for a reason. Often the reason is we are stupid & make bad decisions.
    Weight - Fluctuating - less than I was more than I should be
    1/18: CC:11.5K@0% - Car Loan:17K@2.8% - Mort:145K@2.9%
    Decrease in Total Debt 2016:£13.4K 2017:£8.3K 2018-1H:£11K
    • masonic
    • By masonic 15th Sep 18, 12:52 PM
    • 9,824 Posts
    • 7,033 Thanks
    masonic
    • #6
    • 15th Sep 18, 12:52 PM
    • #6
    • 15th Sep 18, 12:52 PM
    The loan option is certainly worth considering.

    It's not clear whether the 'end goal' needs to come very soon after returning to the UK, but there could be low risk investment options available to you while abroad that would give you exposure to GBP. However, if you want to buy in 3 years and not 5-10 years, this might just trade one risk for another.
    • masonic
    • By masonic 15th Sep 18, 12:55 PM
    • 9,824 Posts
    • 7,033 Thanks
    masonic
    • #7
    • 15th Sep 18, 12:55 PM
    • #7
    • 15th Sep 18, 12:55 PM
    so why protect - its a 2 way street sterling could go up or down against other world currencies
    Originally posted by mark88man
    Yes, in the OP's shoes, I'd probably try to hedge half of the money so as not to be disappointed by either outcome.
    • mark88man
    • By mark88man 15th Sep 18, 1:30 PM
    • 3,229 Posts
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    mark88man
    • #8
    • 15th Sep 18, 1:30 PM
    • #8
    • 15th Sep 18, 1:30 PM
    In my MBA there was a case study when someone hedged half an exposure and he got slammed both for not hedging any of it AND for not hedging all of it.

    I just suggest keep an eye on the rate and if it starts drifting or trade wars get worse then decide to do something.

    obviously having a huge stack of foreign currency in a foreign bank account has its own set of risks independent of the FX position so you probably don't want to end up in 3 years time with £30K in China just when Trump v2 sets the world on fire

    some of the paid for investment services have multi currency systems which are not banks but offer some protection - I think you need to explore what is on offer
    Things happen for a reason. Often the reason is we are stupid & make bad decisions.
    Weight - Fluctuating - less than I was more than I should be
    1/18: CC:11.5K@0% - Car Loan:17K@2.8% - Mort:145K@2.9%
    Decrease in Total Debt 2016:£13.4K 2017:£8.3K 2018-1H:£11K
    • masonic
    • By masonic 15th Sep 18, 1:42 PM
    • 9,824 Posts
    • 7,033 Thanks
    masonic
    • #9
    • 15th Sep 18, 1:42 PM
    • #9
    • 15th Sep 18, 1:42 PM
    In my MBA there was a case study when someone hedged half an exposure and he got slammed both for not hedging any of it AND for not hedging all of it.
    Originally posted by mark88man
    I'm intrigued, how did hedging half of an exposure result in a worse outcome than both hedging all of it and hedging none of it?
    • mark88man
    • By mark88man 15th Sep 18, 2:25 PM
    • 3,229 Posts
    • 6,721 Thanks
    mark88man
    The lesson was about understanding what you were trying to achieve.

    I forget the details, but those who liked hedging/certainty weren't happy because he hadn't hedged all of it and those who didn't like hedging (cost avoidance) weren't happy because he had hedged any of it

    sorry cant be more helpful but I think the actual outcome wasnt the problem
    Things happen for a reason. Often the reason is we are stupid & make bad decisions.
    Weight - Fluctuating - less than I was more than I should be
    1/18: CC:11.5K@0% - Car Loan:17K@2.8% - Mort:145K@2.9%
    Decrease in Total Debt 2016:£13.4K 2017:£8.3K 2018-1H:£11K
    • masonic
    • By masonic 15th Sep 18, 2:48 PM
    • 9,824 Posts
    • 7,033 Thanks
    masonic
    The lesson was about understanding what you were trying to achieve.

    I forget the details, but those who liked hedging/certainty weren't happy because he hadn't hedged all of it and those who didn't like hedging (cost avoidance) weren't happy because he had hedged any of it

    sorry cant be more helpful but I think the actual outcome wasnt the problem
    Originally posted by mark88man
    Well, you can't guard against being considered to have made the wrong move by other people. What matters is achieving the best outcome for yourself.

    A relevant example would be Harry Marcowitz, who won a Nobel prize for devising modern portfolio theory, but when it came to his own retirement savings, said "I should have computed the historical co-variances of the asset classes and drawn an efficient frontier..." but instead "...I visualized my grief if the stock market went way up and I wasn’t in it — or if it went way down and I was completely in it. So I split my contributions 50/50 between stocks and bonds.”
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