Livret A?
July 15, 2011 6:33 AM Subscribe
Transferring savings into euros for a guaranteed interest rate? Is the risk on conversion and inflation worth it?
We have the opportunity to put 15,000 euros into a savings account with a guaranteed rate (2.25%). We are currently earning about 0.4% on our US savings account. Would it be a good idea for us to move the 15,000 euros to the euro denominated guaranteed account? It seems like we are taking a risk on exchange rate and could lose some on the bank's spot conversion rate for the transfers, but the guaranteed interest rate should make it worth those risks. What are we missing? Are there any resources that would help us try to predict the currency fluctuations over, say, the next 5 years?
We are paid in dollars and our savings account is in dollars with a respected international bank. We can transfer money back and forth between the euro account and the US account with no fees or minimal fees, but of course the bank sets the conversion rate.
Note that this is for just part of our savings-- we have separate, US dollar retirement accounts invested in mutual funds and we would keep the US savings account for amounts over the 15,000 euro limit.
Thanks!
We have the opportunity to put 15,000 euros into a savings account with a guaranteed rate (2.25%). We are currently earning about 0.4% on our US savings account. Would it be a good idea for us to move the 15,000 euros to the euro denominated guaranteed account? It seems like we are taking a risk on exchange rate and could lose some on the bank's spot conversion rate for the transfers, but the guaranteed interest rate should make it worth those risks. What are we missing? Are there any resources that would help us try to predict the currency fluctuations over, say, the next 5 years?
We are paid in dollars and our savings account is in dollars with a respected international bank. We can transfer money back and forth between the euro account and the US account with no fees or minimal fees, but of course the bank sets the conversion rate.
Note that this is for just part of our savings-- we have separate, US dollar retirement accounts invested in mutual funds and we would keep the US savings account for amounts over the 15,000 euro limit.
Thanks!
I was just popping in to shill the Ally 5-year CD, too. The minimal penalty Smackfu mentions is, I believe, 60 days' interest, which is really low in the world of CDs.
I have several of those CDs, and they're great--Ally is very easy to deal with.
If you are looking to lock in a guaranteed rate, it makes really no sense to me to add FX risk on top of that. That seems completely contrary to the idea of locking in a higher rate when you can lock in an even higher rate in a USD-denominated account. If you want to play the FX markets (which it doesn't sound like you do), you can do that more efficiently (options, forwards).
This is not banking or investment advice, and I am not your advisor in any capacity.
posted by Admiral Haddock at 6:51 AM on July 15, 2011
I have several of those CDs, and they're great--Ally is very easy to deal with.
If you are looking to lock in a guaranteed rate, it makes really no sense to me to add FX risk on top of that. That seems completely contrary to the idea of locking in a higher rate when you can lock in an even higher rate in a USD-denominated account. If you want to play the FX markets (which it doesn't sound like you do), you can do that more efficiently (options, forwards).
This is not banking or investment advice, and I am not your advisor in any capacity.
posted by Admiral Haddock at 6:51 AM on July 15, 2011
Can you move it into Australian dollars? Citi have it as one of their regular account currencies, 6.5%pa is no trouble.
posted by deadwax at 7:00 AM on July 15, 2011
posted by deadwax at 7:00 AM on July 15, 2011
You don't say exactly how much the bank charges to convert between Euros and Dollars, and what exchange rates they use. Those details could easily cost you upwards of 1%.
There's also the fact that the US Dollar and the Euro are each facing potentially cataclysmic events. The US could default on its debt in the next couple of weeks, and the Euro could be blown up if the current crises with various member countries lead any country to pull out of the Euro.
If you enjoy amusement park rides, sure, move some of your US Dollars into Euros. But if you're looking to manage your cash conservatively and earn a little more interest, you'd be better off pursuing other options.
posted by alms at 7:31 AM on July 15, 2011
There's also the fact that the US Dollar and the Euro are each facing potentially cataclysmic events. The US could default on its debt in the next couple of weeks, and the Euro could be blown up if the current crises with various member countries lead any country to pull out of the Euro.
If you enjoy amusement park rides, sure, move some of your US Dollars into Euros. But if you're looking to manage your cash conservatively and earn a little more interest, you'd be better off pursuing other options.
posted by alms at 7:31 AM on July 15, 2011
The forex risk for 180bps isn't even close to worth it, unless you have interests in using the proceeds in continental Europe. Carry trade isn't for novices. Caveat emptor.
posted by Hurst at 9:57 AM on July 15, 2011
posted by Hurst at 9:57 AM on July 15, 2011
This reminds me of this question:
http://ask.metafilter.com/75621/Can-I-move-my-money-to-Reykjavik
It's not the same thing, but it suggests a similar desire for a risk-free increase in interest.
posted by justkevin at 10:44 AM on July 15, 2011
http://ask.metafilter.com/75621/Can-I-move-my-money-to-Reykjavik
It's not the same thing, but it suggests a similar desire for a risk-free increase in interest.
posted by justkevin at 10:44 AM on July 15, 2011
Response by poster: Thanks guys. We would be likely to use at least some of the money in Europe as we are there often. It sounds like it might be worth it if we aren't going to convert the money back to dollars, but is too risky if we needed to convert back.
Lots to think about!
posted by ohio at 8:34 AM on July 16, 2011
Lots to think about!
posted by ohio at 8:34 AM on July 16, 2011
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Just look at the 5 year EUR-USD chart. A low of 1.2113 and a high of 1.5893, which is around a 30% swing. That is a huge risk to make 2% more per year.
0.4% is bad, but just shows you aren't looking around too much in the US market. For instance, you can get an Ally 5-year CD for 2.33% in USD with a minimal early penalty fee.
posted by smackfu at 6:47 AM on July 15, 2011