Announcement

Collapse
No announcement yet.

Foreign Currency Account

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Foreign Currency Account

    With the $AUD now buying about $1.05USD I was thinking the time may be right to open a Foreign Currency Account in $USD.

    You can go into you local Westpac branch and open one of these accounts. They pay zero interest and have a monthly fee of $50 for a balance up to $50k.

    Trying to pick currency movements is a high risk game ... the money market experts who are paid a fortune still make the wrong calls so what hope have I got? ... but I'm thinking if I dropped a portion of my savings into $USD and left it there for a couple of years hopefully the exchange rate has dropped back to around $1.00AUD = $0.80USD and I've made 30% return minus the monthly fee.

    Any learned people got any ideas?
    I'll be riding for you #52, my dear son, Cameron Taylor Elliott 1985-2009
    2008 CBR600RR and 2010 GSXR750 Track Bikes, KTM530EXC Enduro bike wrist breaker

  • #2
    how much would you put in? $10,000?? 30% on the surface of it is $3,000 but you'd have paid $1,200 in fees in a couple of years, so that's now $1,800 you've made or roughly 18% which is only 9% per year. I'm not sure it's really worth the risk for that kind of return.

    50 bucks monthly fee is far too high, i'm sure you could find a better deal.

    Comment


    • #3
      a quick google finds an 'HSBC Cash Management Account in a Foreign Currency' with no monthly account fee when you have over $10,000 in there or $10 otherwise.

      Comment


      • #4
        Forgive me for asking , but I have been messing around with some figures and it appears that you would lose if you purchased the USD now and waited for it to hit .80 as you have to buy back the AUD. and make a loss plus fees?
        Wouldn't it be better if you waited until the USD was @ .80 and looked like turning , as you buy back the AUD cheaper?

        Am happy to be shown some numbers and proved incorrect , so I will put up some of mine and see where I went wrong maybe...

        !0000AUD / .80 USD = [converted to USD ] = 12500USD note exchange rate @ .80 USD to AUD
        2 years later convert:
        12500USD x say .90AUD [converted BACK to AUD] = 11250AUD?? note exchange rate @ .90 USD to AUD

        Take away the fees @ $50/month x 24 =1200 therefore an operating profit of $50 AUD over 24 months. Therefore if it happened in 3 months you would be flying, but break even is 23 months???

        As you can see , I dunno if I have converted the wrong way , so throw down your numbers so I can see how you got your 30% gross.

        Cheers , and interesting thread
        Sventek, being a predominantly lazy fuck can you please purchase some for me, bring me the stuff, create something I want after you think of it for me then clean my house, wash my car, dog, bike breathe for me.

        Comment


        • #5
          $1000 AUD = $1050 USD

          when USD exchange rate is .80 you would get $1050/.80 which is $1312.50 $aud

          I think you are timesing when you should be dividing. and vice versa

          Comment


          • #6
            Another option could be to open an account in the USA or maybe just buy currency/travellers chqs but I know the bank has different rates for buying/selling currency.

            Comment


            • #7
              Originally posted by HughDMan View Post
              $1000 AUD = $1050 USD

              when USD exchange rate is .80 you would get $1050/.80 which is $1312.50 $aud

              I think you are timesing when you should be dividing. and vice versa
              Cheers Hugh, but I still see 1050 in USD trying to buy back the USD and not the AUD.

              Have another look if you can and put the whole equation down , as it is really getting me confused! thanks
              Sventek, being a predominantly lazy fuck can you please purchase some for me, bring me the stuff, create something I want after you think of it for me then clean my house, wash my car, dog, bike breathe for me.

              Comment


              • #8
                Originally posted by ReCon View Post
                10000AUD / .80 USD = [converted to USD ] = 12500USD note exchange rate @ .80 USD to AUD
                2 years later convert:
                12500USD x say .90AUD [converted BACK to AUD] = 11250AUD?? note exchange rate @ .90 USD to AUD
                In the first line, you've got the AUD being worth more a lot more than the USD. The 0.8 you're representing there indicates that 0.80 AUD is worth 1 USD. Looking from our direction, $1 Australian would need to be worth US$1.25 to start your transaction. We've only really been hovering around parity, the rate you've implied isn't a realistic starting point for planning an investment. Unless you know something we don't

                And in the second line you have the USD strengthening a little, but it's still weaker than the AUD. You'd want to wait until the USD was stronger than the AUD. There's nothing really wrong with your maths, just the Forex rates wouldn't be considered the best to use.

                Comment


                • #9
                  Using the following assumptions:

                  1). You have a home loan.
                  2). You have a marginal tax rate of sayy.. 30%.
                  3). It will cost you $9,500 AUD to buy $10,000 USD today ($1.05 exchange rate today).
                  4). You will get $12,500 AUD with your $10,000 USD in two years ($0.80 exchange rate assumption u mentioned).
                  5). The banks USD account costs u $50 per month and you get no interest on it.

                  Then:

                  1). You would made $2,500 gain.
                  2). You held the currency for more than 12 months, so capital gains tax would only apply to 50% of the gain.
                  3). You are on a 30% tax bracket so you pay $750 tax, so your profit after tax is $1,750.
                  4). It cost you $1,200 in bank fees (deductible), so would be say $850.

                  Result is our profit after tax would be circa $1,000.

                  Not much return on the risk for 2 years.

                  Alternatively the other boring bloke:

                  1). Takes his spare $9,500 and sticks it on his homeloan/bikeloan/whateverloan.
                  2). Which saves him $1,400 interest over the two years.
                  3). Which is after tax money so it actually equivalent to him making $2,000 before tax.

                  Which bloke has the better return and the lower risk? Yah. Mr snore.

                  If you want to take a punt on the US recovery then why not take your AUD and buy $10k worth of US stocks in a company that stands to do well in the recovery (or an index proxy). At least that way you can benefit from a dividend during the hold period, benefit from the increase in share value, and benefit from the exchange rate when you repatriate your funds back into AUD. A triple edged sword if it all works in your favor. And an epic fail if it doesn't.

                  Easier still, find a company on the ASX that generates it's income from the US or stands to do real well out of a weaker AUD. Like....most of em.

                  So on the eight day, after wasting time faffing about with unimportant guff like heaven & earth & the waters & sky & creatures [& having a wee kip] & man.... God created PSB (GenesiSX-R1000)

                  Comment


                  • #11
                    Originally posted by ReCon View Post
                    Cheers Hugh, but I still see 1050 in USD trying to buy back the USD and not the AUD.

                    Have another look if you can and put the whole equation down , as it is really getting me confused! thanks

                    Ok with the rates they tell you, it's usually what 1AUD$ is buying which atm is 1.05USD$ so US exchange rate is 1.05 and we go A$ 1 X US exchange rate =US$ 1.05
                    and to get the US back to AUD$ we divide. so if we have 1.05usd/ us exchange rate we are back to our 1AUD$.

                    So if we buy today we want the rate to go down, for eg if it went down to .80 in 3 months it would be US$1.05 / .8 which equals a$ 1.3125.

                    It might be a good time to buy US real estate.

                    Comment


                    • #12
                      Large attractive modern villa near Orlando, Florida. Ideal hassle free, fully managed, buy-to-let investment home.

                      Just the first one, which came up.

                      Looks like people are taking big losses if the quoted figures are correct,

                      Comment

                      Working...
                      X