Best way to invest in US dollars?

Yes google this group about opening a US bank account

What, you think they're going up?

"Jeremy" wrote

Wouldn't you miss-out on any *interest* then??

This must be a joke post!

Put it in a mini cash ISA and never look back.

Since none of our resident math geniuses has helped i will offer my simple maths.

The current price of a pound to a dollar is about 1.84. Having just looked at the Thomson website commission free purchase and sell of US dollars is buy: 1.7488 and sell: 1.9612. A big spread.

So if you bought 1000 of dollars you would have 1748 dollars. If you were to immediately sell them back to pounds at 1.9612 you would get 891. A loss of 109.

To break even not calculating inflation or the 37.5 interest gained on an ISA paying 3.75% per annum and using the current spread of 12.1455%, the exchange rate would have to drop from 1.84 to 1.558. With the spread the sell of currency would be 1.747 which would equal about 1000.

If the dollar dropped to its level of about 2 years ago at 1.4, with the spread your profit would be about 113, about the same as your cash being invested for three years in an ISA with nil risk. If you intend to spend the dollars your profit would be 249, although this would not be real profit as this should be discounted back to include unknown inflation and compared to other investments.

As for dollar accounts the banks aren't going to be interested in a measly

1000 and with US interest rates at 1% don't expect any interest on your money.

You could consider spread betting, but you have to understand the markets and be ready to act.

Anyhow, the dollar is going to fall further, its what the FED wants. Why you so sure its peaked.

OK, I was thinking about this last week when reading about a lottery winner. If someone changed 1 million UK Sterling in 1 million US dollars now, put that in a US bank earning the 1% interest they would not make much money. However, if they waited 12 - 14 months, US election comes and go, US economy rebounds and there is no longer a need for a weak dollar and the dollar/pound returns to 'normal', couldn't that person transfer all their dollars back into pounds and make a serious profit?

Would such a person then be deemed as someone making money from currency transfers? What kind of tax would be on that?

Just curious,

J.

Of course they 'could' but equally the pound /dollar may stay where they are for a long time or get worse (from the POV of this thread), if you look at a graph of the rate over the past say 20 years there is no such thing as 'normal'. Plus, with the way you lose money on transfers, the change in value would need to be quite substantial to cancel out the losses on the double exchange. Dunno what tax you'd pay, capital gains I suppose.

There was an article from the bbc on this subject.

No idea.

Likely to be liable to CGT.

In truth I suspect, as usual, that the media are getting into the story when it's largely over, the dollar may have a bit further to fall but I would guess that most of the adjustment has already happened. $2 to the £ maybe, but I doubt we'll see $2.50. OTOH I wouldn't be expecting a big rebound either.

I thought currency transactions weren't normally in the CGT net? (because most people make losses!) It might be different if you were classified as a trader - maybe possible on £1 million I suppose, but even then probably not if you only do it once.

Just to put another angle on this debate. I work for a US investment bank and my bonus paid at the end of this month is delared in USD and then paid into my normal sterling current acccount. The FX rate we get is probably only slightly better than what a high street bank would give.

We have been given the choice of having the payment kept in USD and paid into a USD account. My initial thought was to do this as I do not need the cash for anything in particular, but I am starting to change my mind. Firstly when I do FX it back to GBP I will probably not get quite as good a rate as my employer would give. Secondly the interest rate would not be as good as if held in a sterling account and if it takes time for the rate to come down I could lose any benefits.

Instead I am thinking about just putting the money into for example a FTSE tracker as the risk is probably slightly less than with the FX rate and if kept there for a few years would probably perform better.

But is there a way I could keep the money in USD and then invest it on the US markets? Say in a Dow tracker?

Thanks Andy

It really depends on your objectives.

If you were going to buy Dow trackers anyway, then yes, it might be a good idea to open a US account and transfer the money to a US Broker or a UK Broker with a dollar account. I could be wrong, but I think they are priced in Pounds when you buy them in the UK, so it wouldn't really give you anything unless you bought them in the US.

However, the aren't less risks in an FTSE Tracker than there are in the FX Markets. To think otherwise is just wrong.

The majority of my assets are in dollars. If it wasn't for the fact that I invest a lot in US markets, I would sure prefer to have most of my money in Pounds. In your case, I would exchange my money in Pounds immediately even if it meant taking a small hit due to the exchange, but it's really hard to say without knowing more about your circumstances.

In message , Andy Coleman writes

Invest in a US tracker fund denominated in US Dollars.

The denomination doesn't really matter, any US tracker will do if it isn't hedged.

Might be worth comparing them with

Daytona

Have you considered keeping it in USD and putting into a tracker of the S&P

500. I believe, although could be wrong, that over the long-term this index has been the most profitable in terms of growth???

In message , Stephen Burke writes

But why should he take the cost of exchanging form dollars to (say) STG? He may as well go straight into the US$ denominataed fund.