We have a relative who is working in Japan and after saving a bit of money wants to convert it to a different currency, since they will leaving Japan shortly.
What would be a good currency to save it in, over the long term? How would one seek out some kind of financial indicators as to the best currency to select? A friend suggested the U.S.A dollar, but would that be a good bet? Thanks
Depends on where they are going.
Correct. Where are they going?
Thanks to all. Going to the U.K.
Euro.
I would go with Pound Sterling or Euros
Remember there is a phenomenon called 'interest rate parity', described at
But then they are exposed to the Euro/pound rate, which can move around quite a bit.
Pounds would be better.
Another factor is they *must* shop around for the best conversion rate and commission, and do this only once.
The cost of converting can be up to 5% of the money transferred (you have: foreign exchange commission, bank transfer or wire charges, bid- offer spread on buying foreign currency-- just to name 3 costs).
So you only want to do this *once*. To minimise exchange risk on Yen/ pound, they might split the transactions into 2 (one now, say, and one in 6 months time for the other half). This might cost them a little more commission, but reduces the chance of the Yen moving up against the pound and a lost opportunity for them.
If they are going to live in the UK next, they want to convert to pounds.
If they are going to the UK, then they should save in pounds. That way they minimise the risk of currency losses. Any other strategy, the currency losses can easily wipe out any gains from a higher interest rate.
Who knows what the pound/dollar, pound/euro or pound/ yen rate will be in 12 months time?
You should be able to get around 5% on a good UK savings account. Note unless it is 'offshore' then 20% of interest paid will be withheld at source (UK tax law).
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