Besides emerging market bond funds, what are the ways to capture higher interest rates abroad. In London, for instance, banks are offering 6% interest rates on savings account. And MExican Central Bank yesterday maintained their interest rate at 7%. I am not worried about currency exposure as I think the dollar would stablize or even decline somewhat here.
The market says otherwise.
If the one year rate in the US is 5%, and in Mexico, it were 10%, the market is making a statement that the dollar is rising against the peso. Looking at the currency futures contracts can confirm this. Any anomalies in the exchange rate vs interest rate are quickly arbitraged away for a small profit. A currency that's rising against the dollar will naturally have a lower interest rate for a short term instrument.
JOE JoeTaxpayer.com
What if you are taking the opposite call. Say, I am personally bearish on the dollar and want to take a view to have some non dollar assets. What's the best way to do it besides buying a mutial fund.
I know your not exactly looking for mutual funds... but this would be right up your alley... the Merk Hard Currency Fund... MERKX
Shhhh
Fidelity New Markets Income
Dave
One can buy a futures contract on many currencies, including the Mexican Peso, on the Chicago Mercantile Exchange. The contracts are priced to account for interest rate differentials. To trade futures, one needs a futures account. I have a brokerage account at OptionsXpress that lets me hold stocks, stock options, and futures in a single account.
I think investors, not just speculators, can use futures, but they must understand the transactions they are entering and the risks involved.
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