Better interest rates outside the UK?

In message , snipped-for-privacy@yahoo.co.uk writes

yes

yes

OK

Try a UK bank and open a currency account.

Not sure who can do this.

No problem.

What if volatility of exchange rates wipes out your interest rate margin and your capital?

Of course

Ummmm...have you considered that changes in exchange rates, plus two way conversion (Sterling->Dodgy Currency ->Sterling) might wipe out (and more) any better interest rates you'd get elsewhere? No such thing as a free lunch.

Our interest rates are quite high internationally. The Eurozone base rate is 2%, the US base rate is 1%, the Japanese base rate is 0.1%. What currency were you thinking of?

You could probably get a very high rate if you invested in Turkish Lira, but as their inflation rate is about 80% it won't do you much good.

Yes. There is no law against it. However, you may not get as good a deal as residents of the country in question.

Also, note if you were to hedge against foreign exchange losses on your investment, the net interest rate would work out exactly the same as if you kept it in a GBP account in the UK. From that you would have to deduct transaction costs, so you would end up worse off.

Your own bank will almost certainly have foreign currency accounts. Note that you are just speculating on currency movements. You aren't really getting a higher rate of interest.

Anyone know a UK bank that offers any sort of decent interest rate for a euro savings account. I investigated this a while ago. Failed to find one.

Current rate I get on a normal (probably min 25k or so) savings acct in euro is 3.5% (accts in NL)

HSBC offer 2ish? Citibank offer 0.xxx as I remember. What was certainly true is both were way under 3.5%

Next requirement: a reasonable cost - close to capital market exchange rate for transfer from GBP to the euro acct. (Amounts of 10-30k GBP) Any suggestions?

To the OP. No problem to hold foreign funds but playing exchange markets is pure gambling IMHO. Yes you might win lots but equally you might lose everything too. David.

Software author. (please edit my email addr. to prove you're not a dumb 'bot) Web Log Analyzer by Search Term

"david" wrote in message news: snipped-for-privacy@news.teranews.com...

Interest on euro account is governed by euro interest rates (set by ECB) which currently stand at 2% as against 3.75% sterling by BOE.

Alec

Its not so much which country the bank account is in that determines the interest rate, but rather what currency its in. Many banks in the UK will open foreign currency deposits accounts that pay higher (and often lower) rates of interest.

Put that another way, what if "volatility of exchange rates wipes out your interest rate margin and your capital" whilst his money is held in a British bank account?

Food for thought eh?

We all are playing the currency market, although many of us are not aware of it.

In message , half_pint writes

Its UK company whose assets and accounts will be maintained in sterling, therefore there is no exchange risk.

I think its possibly 'inflation' to which you meant to refer.

Well obviously not that part of the assets the OP intends to put into foreign currency!

In message , Tumbleweed writes

Quite! I was referring to the concept of the cash staying in UK!

The point I was making was that you only pointed out the downside of investing in a foreign currancy, ie you could lose money due to exchange rate fluctuations. You could also gain from such fluctuations. In real terms you are also gambling by staying in sterling, if sterling drops you lose money in real terms, athough you still have the same number of pounds in your account. I would call this 'passive' gambling. A truely cautious approach would be to have your money invested in a wide range of currancies. Its a bit like investing in shares where sterling is shares in the company you work for, there is a risk in buying shares in another company, but also a risk in staying in 'sterling' (your own 'company').

I agree with your concept up to a point, but you also have to take into account the currency that your expenses are denominated in. If all your commitments are in sterling then there is some sense in keeping your investments in sterling. You may have lost something in terms of global buying power that investing in a range of currencies would provide, but you've eliminated any risk of your expenses losing their relationship to your income.

In message , half_pint writes

I dont go along with this bit if a company has no asset or liability denominated in anything other than sterling.

When that was tried with mortgages a few years ago it went spectacularly wrong.

Except that the shares are both denominated in sterling.

I take the point you are trying to make, but because UK Companies who always denominate their accounting in Sterling, then any element of currency exposure will increase risk. No currency exposure removes that risk entirely and the strength/weakness of sterling is irrelevant.

Well they're not governed but they are influenced. There are lots of savings accounts offerring differrent deals with differrent rates (just like here). Your comparison does beg the question why rates aren't higher in the UK. 3.5% on euro is a std rate on an internet savings account from abnamro paid on min balance over quarter probably with a minimum (10k?). Best sterling rate according to the paper s around 4.5% I.e. abnamro are managing base rate +1.5%. Postbank are similar (these are equivalent to biggest high street banks in UK) Best UK savings accounts are base rate +0.75%

The problem with seeing what happens in another country is you inevitably wonder if you aren't being ripped off in the UK. Is there a good reason for this difference that isn't fat cat city salaries?

Of course interest rates are a little lower in euros now but my reasons for transfers are not related to currency speculation anyway. For now I choose to hold cash in euros because I believe the euro will rise further over the long term against sterling. Anyway most of my spending is done outside the UK.

The question remains the same and I guess the answer is that UK banks are not yet offerring any competetive rates on euro accounts.

David.

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In message , david writes

That seems a very complicated calculation, in other words the more you put in the lower the average rate till the end of the quarter.

Effectively yes. It's equivalent to a 3-month fix but with the flexibility to withdraw losing most of the interest for that quarter on the withdrawn amount.

The way to get a good rate is leave money in for the whole quarter and accumulate extra income in another account paying 3% and transfer it end of quarter. If you need to take money during the quarter you lose about 2% on the amount you withdrew.

Just like here, banks operate a policy of reducing rates on existing accounts and introducing new accounts so if you want a good rate you have to keep an eye on them anyway.

David.

Software author. (please edit my email addr. to prove you're not a dumb 'bot) Web Log Analyzer by Search Term

Not exactly. If interest is paid on the minimum balance, then not only do you get no interest on money you add during the quarter, but you also lose *all* (not most) of the interest on money withdrawn during the quarter.