oh my should I put my money in a mattress?
December 15, 2008 7:29 AM   Subscribe

I'm moving overseas from the US in less than a year, and my stellar powers of observation tell me that there's a good chance the dollar is going to eat shit before then. My savings are <$10,000, what can I do with them to ensure that I'm not cursing the economy when I leave? Is putting it in foreign currency enough, or is there a better option? How do I do that?

I know we're probably not talking about anything catastrophic here (though maybe!), but I've had the dollar devalue on me before and it sucks even when it's a fraction of a percent. I have everything in a money market account now, which I like because I'm earning some interest but all of my money is still easily accessible. I'm not looking for some long-term investment solution, I just want to make sure I have roughly the same amount of money I put in there at the end of next year.
posted by borkingchikapa to Work & Money (12 answers total) 1 user marked this as a favorite
You could a fraction of that in currency futures on something like optionsXpress to protect yourself in the event of a large shock to the euro dollar exchange rates. Otherwise playing the currency markets is risky, even for professionals, and it is best that you don't try to time the market. You shouldn't be gambling your savings on international currency fluctuations.
posted by geoff. at 7:37 AM on December 15, 2008

The dollar is actually quite strong vs. the pound these days. Today they are trading at 1.53. Since the UK and Europe in general lagged behind the U.S. in entering recession, it seems likely the dollar will continue stronger than the pound well into next year.
posted by netbros at 7:42 AM on December 15, 2008

Yeah, the dollar is strengthening because the asset bubble which existed in dollars is gone. I'd hold off on doing much and get the advice of a professional.
posted by Ironmouth at 8:02 AM on December 15, 2008

I work for a currency trading company and I can tell you for a fact that what you're asking for is next to impossible. There are certain mutual funds that do a complex process that involves buying a currency and then shorting it an equal amount to offset currency changes. This is also popular with mutual funds that invest in international markets in in order to protect investors from currency fluctuations.

You should just convert any money you need in the currency you require as you need the money. In other words, if you're moving away for years just convert it now and be done with it. If the money is for your retirement, just leave it and invest it as you would have before. Find the company that offers the best exchange rate and beware of too many fees (they're already making money off of rather poor exchange rates). It's impossible to predict the short term. If you were worried about a large amount of money over the long term, then one of those mutual funds would be in your interest.
posted by hylaride at 8:04 AM on December 15, 2008 [1 favorite]

There are a number of Exchange-Traded Funds that you can buy into, via any brokerage account, that let you hedge against the dollar by adopting a position in the Euro, Pound, or other currency of your choice.

I wrote a blog post about the Euro ones a while back, which may or may not be of any interest to you. I think the type of thing you'd be most interested in is FXE or similar. It's sort of like owning shares in a big bank account filled with Euros. You get a little bit of interest, plus the EUR/USD exposure, which can be either to your advantage or detriment. I think the same company runs similar vehicles for GBP and several other currencies, if Euros aren't what you're looking for. (SEK were seemingly popular a while back; I'm not really sure why but I didn't look into it that deeply.)

The advantage versus actually setting up a foreign-currency account is liquidity; you can trade FXE shares at the drop of a hat and not incur any fees beyond whatever your broker charges, and there's no minimum balance. This might not be as much of an issue for you as it is for others, since maybe you'd use a Euro (or GBP, or whatever) account when you move anyway, and you could just get it done early.

But if you just want to gain foreign currency exposure and hedge against the dollar, FXE is pretty easy. (If you don't want to do cash, there are other options that invest in foreign debt, and offer somewhat higher returns; they're more like a "money market" account rather than a cash one.)

I'm not totally convinced that the dollar is going to get clobbered, but if you are, there are lots of ways to get a position set up to benefit from it.
posted by Kadin2048 at 8:13 AM on December 15, 2008

I'm moving overseas from the US in less than a year, and my stellar powers of observation tell me that there's a good chance the dollar is going to eat shit before then.

Over the last few months the dollar has gotten stronger than it has been in years. If this is a surprise to you, maybe your powers of observation aren't as stellar as you think.

If you change your currency to, say, Euros now, realize that there is a good chance that you will be cursing the European economy when you get there. Or wherever it is that you are going.

Where are you moving, how long will you be there, and how much of the local currency will you need to take from your savings?
posted by grouse at 8:37 AM on December 15, 2008

Where are you moving? The USD is very strong right now, and one option would be to convert your USD to the currency you're going to be living in, not as a hedge, but simply because the rates look good. There has been alot of talk lately about USD inflation, but nobody really knows anything concrete.
posted by cmyr at 9:20 AM on December 15, 2008

Don't bother unless you'll need it when you arrive. I'd say take a cheap apartment with nice flatmates when you arrive, that will get you some friends and save you enough money that you can merely live on your local pay without needing your dollars.

Switch your credit card to Capital One because they charge only Visa's 1% on currency conversion, not the 3% charged by many many others.
posted by jeffburdges at 9:46 AM on December 15, 2008

i love the strong dollar consensus here...
posted by dougiedd at 10:04 AM on December 15, 2008

There's no strong dollar consensus here. The only consensus is that if you think you can predict which way the currency markets are going to go, you're probably wrong.
posted by grouse at 10:09 AM on December 15, 2008 [4 favorites]

Put it something like a HSBC account. At least then you can get 3% + interest on it. And you can likely access it in your destination country with no conversion penalties.
posted by Ookseer at 12:33 PM on December 15, 2008

my stellar powers of observation tell me that there's a good chance the dollar is going to eat shit before then

There is nothing short of insider information that could tell you this.
posted by oaf at 1:17 PM on December 15, 2008

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