What are your views on this? Australian dollars FCNR deposit gives around 7 % per annum now. Your feedback please.
http://statebankofindia.com/viewsection_opennew2.jsp?lang=0&id=0,16,387,388
Investing in Australian Dollars - FCNR deposit
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r2i_decide
- Posts: 54
- Joined: Tue Jan 16, 2007 12:04 am
Investing in Australian Dollars - FCNR deposit
Hellome:
That is a great rate. However, how do you convert USD into AUD in India? I am not sure where you live.
Unless you are in possession of AUD, I believe you have to convert USD->INR->AUD->INR. For US residents thats a lot of loss - just during currency conversion. Have you factored that in? or is there a better way to convert USD into AUD.
Have you looked at Everbank in US. They offer 'decent' rates on NZD and AUD. What do you think of them?
http://www.everbank.com/001WorldCurrencyCDSingle.aspx?LinkID=Body1
That is a great rate. However, how do you convert USD into AUD in India? I am not sure where you live.
Unless you are in possession of AUD, I believe you have to convert USD->INR->AUD->INR. For US residents thats a lot of loss - just during currency conversion. Have you factored that in? or is there a better way to convert USD into AUD.
Have you looked at Everbank in US. They offer 'decent' rates on NZD and AUD. What do you think of them?
http://www.everbank.com/001WorldCurrencyCDSingle.aspx?LinkID=Body1
Investing in Australian Dollars - FCNR deposit
r2idecide
I do not understand why one should convert USD to INR to AUD. Is it not possible to convert USD straight to AUD using a simple wire transfer? That is for example, you can send funds in USD to SBI and request them to directly convert USD to AUD OR you can convert USD to AUD at the originating bank's end itself during the wire transfer.
Can you please correct me here if I am mistaken.
Overall what is your opinion on fcnr deposits in AUD in the present economically tough situation..
Thanks.
I do not understand why one should convert USD to INR to AUD. Is it not possible to convert USD straight to AUD using a simple wire transfer? That is for example, you can send funds in USD to SBI and request them to directly convert USD to AUD OR you can convert USD to AUD at the originating bank's end itself during the wire transfer.
Can you please correct me here if I am mistaken.
Overall what is your opinion on fcnr deposits in AUD in the present economically tough situation..
Thanks.
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HAKUNAMATATA
- Posts: 403
- Joined: Sat Mar 03, 2007 4:09 am
Investing in Australian Dollars - FCNR deposit
A professional currency trading company can be used to forward buy any currency upto one year in advance by paying 10% deposit or for immediate conversion. These companies further work out cheaper in money transfer as their commission is a few cents. One of the company i've used is HI-FX in the UK though, and i am sure they must have a branch in the US.
Aussie and NZ dollar have started to fall as there have been global fears on growth so i would say they would or should become a good buy, however if you are quick you can fix your deposits on bonds for 2-3 years at 6.5-7% on these currencies or nearly 8% with sbi for 5 years(link posted), which should also get harder to find from next week.
I was very lucky to find a 2 year fixed rate of 6.17% on sterling 6 months ago for my mum on a monthly based income. Those rates have fallen to 5,85% and still falling.
http://www.sbi.co.in/viewsection_opennew2.jsp?lang=0&id=0,16,387,388
http://www.hifx.co.uk/
Just an addition, these currencies might sound lovely at the moment as New ZEALAND have a high inflation and a housing boom and to curb these the interest rates are high similar with Aussies they too have a huge inflationary and housing boom(not to mention their mining boom) , but once these collapse, give it a thought these currency could fall in value just like the dollars have and fall even harder if the mining boom goes for the Aussies. I also think the dollar is set to bounce back against the rupee, end of this month and next week is crucial to see where the world markets are going(including India's).
Nz bank perspective: http://www.nationalbank.co.nz/personal/product/index/fxrates.aspx
Aussie and NZ dollar have started to fall as there have been global fears on growth so i would say they would or should become a good buy, however if you are quick you can fix your deposits on bonds for 2-3 years at 6.5-7% on these currencies or nearly 8% with sbi for 5 years(link posted), which should also get harder to find from next week.
I was very lucky to find a 2 year fixed rate of 6.17% on sterling 6 months ago for my mum on a monthly based income. Those rates have fallen to 5,85% and still falling.
http://www.sbi.co.in/viewsection_opennew2.jsp?lang=0&id=0,16,387,388
http://www.hifx.co.uk/
Just an addition, these currencies might sound lovely at the moment as New ZEALAND have a high inflation and a housing boom and to curb these the interest rates are high similar with Aussies they too have a huge inflationary and housing boom(not to mention their mining boom) , but once these collapse, give it a thought these currency could fall in value just like the dollars have and fall even harder if the mining boom goes for the Aussies. I also think the dollar is set to bounce back against the rupee, end of this month and next week is crucial to see where the world markets are going(including India's).
Nz bank perspective: http://www.nationalbank.co.nz/personal/product/index/fxrates.aspx
Investing in Australian Dollars - FCNR deposit
Please read this link
http://bloomberg.com/apps/news?pid=20601087&sid=aZuU3SFfpMEs&refer=home
Would appreciate your feedback on this since it seems VERY LOGICAL to me with regard to investment in AUD.
http://bloomberg.com/apps/news?pid=20601087&sid=aZuU3SFfpMEs&refer=home
Would appreciate your feedback on this since it seems VERY LOGICAL to me with regard to investment in AUD.
Investing in Australian Dollars - FCNR deposit
hellome;76295Please read this link
http://bloomberg.com/apps/news?pid=20601087&sid=aZuU3SFfpMEs&refer=home
Would appreciate your feedback on this since it seems VERY LOGICAL to me with regard to investment in AUD.[/quote]
Desi, RRK and others
Can you please throw some light and give your opinion if fixed deposits in AUD's is logical at this point of time.
Investing in Australian Dollars - FCNR deposit
Hellome,
Everbank and Etrade https://us.etrade.com/e/t/welcome/globaltrading?SC=NPNM358 offer avenues of investing in foreign currencies. One has to be wary of costs as a percentage of overall trade.
[quote]Desi, RRK and others
Can you please throw some light and give your opinion if fixed deposits in AUD's is logical at this point of time.[/quote]
You are asking about fixed deposit - this means you are looking for safety of principal. However you are considering a currency other than USD (assuming you are in US) and this means you are chasing higher returns. Higher returns do not come free, there is a cost associated with it and the cost is risk. The risk is of foreign currency translation.
If you can make 4% in US and 7% on your money in AUD say for one year. Then you are making 3% more per year and that would be 6% in two years. If your costs of currency translation plus USD appreciation against AUD exceeds 6% in two years, you would be better off in US. On the other hand if AUD appreciates or stays same, you will feel happy with increased returns. Elementary, you already know that. What you want is me to speculate whether AUD will appreciate against USD in two years - that, my friend is the gist of your question when you ask if it is logical.
I do not know what the AUD will do in two years against USD. Even the most experienced currency traders cannot tell you that. There are experts who claim that USD will continue to depreciate and yet there are others who are saying that since USD has depreciated 20% or so last year that we are close to a bottom and USD will not deprciate to like a third world currency and will reverse. So you see, opinions about and which one do I believe?
Besides, if it is fixed deposit you are chasing then it seems safety is important to you, but then you speculate and take risk with a foreign currency CD.
The best way to invest is per your AAP and have a good diversification across the world. If you are trying to diversify your fixed income across the world also, then you can look at short term international bonds, but they also come with the risk. I do not know your goals, other investments and if after 2 years you absolutely need this money for a specific goal.
Just as an FYI, I personally am invested in some international bond funds.
Some alternative options if you are interested in keeping your money in AUD are FXA (currency shares, but they will not give you fixed deposit rates), international bonds, Everbank, Etrade, Australian stocks, and Australian currency trades as Hakunamatata pointed out and currency futures.
Whether AUD will appreciate, I don't know. Sorry for the long winded answer when a simple sentence (I don't know) would have sufficed.
You really need to have a clear understanding of the end goal for that money and based on that the risk you are willing to tolerate and understand how you are going to mitigate higher risks of a single currency.
Everbank and Etrade https://us.etrade.com/e/t/welcome/globaltrading?SC=NPNM358 offer avenues of investing in foreign currencies. One has to be wary of costs as a percentage of overall trade.
[quote]Desi, RRK and others
Can you please throw some light and give your opinion if fixed deposits in AUD's is logical at this point of time.[/quote]
You are asking about fixed deposit - this means you are looking for safety of principal. However you are considering a currency other than USD (assuming you are in US) and this means you are chasing higher returns. Higher returns do not come free, there is a cost associated with it and the cost is risk. The risk is of foreign currency translation.
If you can make 4% in US and 7% on your money in AUD say for one year. Then you are making 3% more per year and that would be 6% in two years. If your costs of currency translation plus USD appreciation against AUD exceeds 6% in two years, you would be better off in US. On the other hand if AUD appreciates or stays same, you will feel happy with increased returns. Elementary, you already know that. What you want is me to speculate whether AUD will appreciate against USD in two years - that, my friend is the gist of your question when you ask if it is logical.
I do not know what the AUD will do in two years against USD. Even the most experienced currency traders cannot tell you that. There are experts who claim that USD will continue to depreciate and yet there are others who are saying that since USD has depreciated 20% or so last year that we are close to a bottom and USD will not deprciate to like a third world currency and will reverse. So you see, opinions about and which one do I believe?
Besides, if it is fixed deposit you are chasing then it seems safety is important to you, but then you speculate and take risk with a foreign currency CD.
The best way to invest is per your AAP and have a good diversification across the world. If you are trying to diversify your fixed income across the world also, then you can look at short term international bonds, but they also come with the risk. I do not know your goals, other investments and if after 2 years you absolutely need this money for a specific goal.
Just as an FYI, I personally am invested in some international bond funds.
Some alternative options if you are interested in keeping your money in AUD are FXA (currency shares, but they will not give you fixed deposit rates), international bonds, Everbank, Etrade, Australian stocks, and Australian currency trades as Hakunamatata pointed out and currency futures.
Whether AUD will appreciate, I don't know. Sorry for the long winded answer when a simple sentence (I don't know) would have sufficed.
You really need to have a clear understanding of the end goal for that money and based on that the risk you are willing to tolerate and understand how you are going to mitigate higher risks of a single currency.
Investing in Australian Dollars - FCNR deposit
Desi;76628Hellome,
Everbank and Etrade https://us.etrade.com/e/t/welcome/globaltrading?SC=NPNM358 offer avenues of investing in foreign currencies. One has to be wary of costs as a percentage of overall trade.
You are asking about fixed deposit - this means you are looking for safety of principal. However you are considering a currency other than USD (assuming you are in US) and this means you are chasing higher returns. Higher returns do not come free, there is a cost associated with it and the cost is risk. The risk is of foreign currency translation.
If you can make 4% in US and 7% on your money in AUD say for one year. Then you are making 3% more per year and that would be 6% in two years. If your costs of currency translation plus USD appreciation against AUD exceeds 6% in two years, you would be better off in US. On the other hand if AUD appreciates or stays same, you will feel happy with increased returns. Elementary, you already know that. What you want is me to speculate whether AUD will appreciate against USD in two years - that, my friend is the gist of your question when you ask if it is logical.
I do not know what the AUD will do in two years against USD. Even the most experienced currency traders cannot tell you that. There are experts who claim that USD will continue to depreciate and yet there are others who are saying that since USD has depreciated 20% or so last year that we are close to a bottom and USD will not deprciate to like a third world currency and will reverse. So you see, opinions about and which one do I believe?
Besides, if it is fixed deposit you are chasing then it seems safety is important to you, but then you speculate and take risk with a foreign currency CD.
The best way to invest is per your AAP and have a good diversification across the world. If you are trying to diversify your fixed income across the world also, then you can look at short term international bonds, but they also come with the risk. I do not know your goals, other investments and if after 2 years you absolutely need this money for a specific goal.
Just as an FYI, I personally am invested in some international bond funds.
Some alternative options if you are interested in keeping your money in AUD are FXA (currency shares, but they will not give you fixed deposit rates), international bonds, Everbank, Etrade, Australian stocks, and Australian currency trades as Hakunamatata pointed out and currency futures.
Whether AUD will appreciate, I don't know. Sorry for the long winded answer when a simple sentence (I don't know) would have sufficed.
You really need to have a clear understanding of the end goal for that money and based on that the risk you are willing to tolerate and understand how you are going to mitigate higher risks of a single currency.[/quote]
Desi, thanks for your detailed reply!.
The main objective behind my question is as follows. I am looking for some fixed deposits (fcnr deposits in some safe Indian banks)on diversified currencies in my portfolio (I am clearly aware of the currency risks). I was quite tempted about the 7% on AUD ..I totally agree with you on the currency risks possible - however I am not sure if USD/GBP/EUR will do well too. So, was thinking why not AUD .. and the article from bloomberg http://bloomberg.com/apps/news?pid=20601087&sid=aZuU3SFfpMEs&refer=home convinced me a bit more and hence my query.
Investing in Australian Dollars - FCNR deposit
Hellome,
If you want to keep a fixed deposit in AUD recognizing fully the foreign exchange risks, then what is the issue. I do not know what else to say. A fixed deposit is a fixed deposit. You will have currency translation losses of converting USD to AUD and reverse. You may want to explore those costs and they could be a few percent of your amount.
You may want to explore everbank also - http://www.everbank.com/001WorldCurrencyCDSingle.aspx?LinkID=Body1
The yield of FXA is 5.17% and this one is very liquid in that you can buy and sell on NYSE.
Note that banks in USA are lending money to mortgage borrowers for 5% and if they can get 7% for AUD, why are they not going for it? The answer lies in the Interest rate parity and risk. Typically the interest rate differential is such as what is expected by market place to be compensated by foreign exchange movements. Thus opportunities for arbitrage are not there, even though they may appear to be so. That said there are factors that will move currency markets that are not known at present and cannot be easily factored in.
You may want to google interest rate parity and read up on it, a bit.
Arbitrageurs have been borrowing money from Japanese banks using collateral at a very low rate of 1% or less and then buying bonds in US paying higher interest. This is called Yen carry trade. Of course there are big risks to this approach also. They can then use these bonds as further collateral to borrow more money to leverage their assets.
If you want to keep a fixed deposit in AUD recognizing fully the foreign exchange risks, then what is the issue. I do not know what else to say. A fixed deposit is a fixed deposit. You will have currency translation losses of converting USD to AUD and reverse. You may want to explore those costs and they could be a few percent of your amount.
You may want to explore everbank also - http://www.everbank.com/001WorldCurrencyCDSingle.aspx?LinkID=Body1
The yield of FXA is 5.17% and this one is very liquid in that you can buy and sell on NYSE.
Note that banks in USA are lending money to mortgage borrowers for 5% and if they can get 7% for AUD, why are they not going for it? The answer lies in the Interest rate parity and risk. Typically the interest rate differential is such as what is expected by market place to be compensated by foreign exchange movements. Thus opportunities for arbitrage are not there, even though they may appear to be so. That said there are factors that will move currency markets that are not known at present and cannot be easily factored in.
You may want to google interest rate parity and read up on it, a bit.
Arbitrageurs have been borrowing money from Japanese banks using collateral at a very low rate of 1% or less and then buying bonds in US paying higher interest. This is called Yen carry trade. Of course there are big risks to this approach also. They can then use these bonds as further collateral to borrow more money to leverage their assets.
Investing in Australian Dollars - FCNR deposit
Desi;76698Hellome,
Note that banks in USA are lending money to mortgage borrowers for 5% and if they can get 7% for AUD, why are they not going for it? The answer lies in the Interest rate parity and risk. Typically the interest rate differential is such as what is expected by market place to be compensated by foreign exchange movements. Thus opportunities for arbitrage are not there, even though they may appear to be so. That said there are factors that will move currency markets that are not known at present and cannot be easily factored in.
.[/quote]
Desi, Thanks again!! I completely agree with you.
Using the same logic as explained by you (see bold above), I stayed away from INR NRE Fixed deposits when we were getting something like 7 to 8% earlier when USD was fetching less than half. I was so sure that the rupee would depreciate against the USD and preferred to retain in USD in order to avoid the possible currecny conversion risk. And now, exactly the reverse happened !