# Thoughts on Converting Euro Savings to GBP



## Daddy (1 Oct 2011)

I am strongly considering withdrawing my Euro cash deposits from NIB and going North and opening a sterling account.   It has to be a safer bet than leaving it in the euro with all the uncertainty in the coming months.  Ulster Bank Newry pay a reasonable 1 year fixed rate of 2.8%.   I am well aware of the associated currency risks but this is how I see it.  If the euro collapses sterling will be worth more full stop.  If things settle down in a years time I can always repatriate it to southern Ireland.    I know the UK economy is no star but it has to be safer than Euroland at this point in time.   Is there anyone who agrees or who has done this or anyone who thinks my theory is wrong at this moment in time.


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## WizardDr (1 Oct 2011)

With all the 'risks' going around I would be worried about the sun coming up tomorrow and whether we have a plan for that. Serious though Moodys and Standard & Poors are now competing with each other to 'identify' the next risks.

On the Euro - none of the matters involving Greece, Spain, Italy, Portugal and Ireland were new. They first were aired by the German Bundesbank in 1995. The then so called 'club-med' countries curiously had the same problems now as they had then. Greece invariably lied about its statistics and they ran a deficit you could only marvel at. 

There were three tests at the time - inflation, debt to gdp and borrwoings as % of gdp.

When Germany was unable to revalue its gold reserves.. it failed the debt/gdp test amd so the all the Club med countries (and Ireland) got into the single currency.

Then nothing was done vis a vis Greece and Italy .. so none of this is new. Not any of it. 

Just becasue we are now 'identifying' risks does not mean the patient is actually going to die. If it is, then the disease is 15 years old and was just as fatal then as now.

I have written several times here about this - but instead of issues - we sometimes attack the individual. 

I think that the markets 'assumed' that the bonds of all countries in the Euro were effectively similar to those of Fanniae Mae in the US - that whlst there was not an explicit government guarantee - there would be in the event of the nightmare situation.

I dont think the Euro is collapsing anytime soon. 

If you feel happy to move your deposit, then move it.


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## pudds (1 Oct 2011)

I have very little savings in real terms but I feel its even more important for people like me to do the utmost to protect what little we have.

I've read all the posts about putting your money here or there or outside the euro zone all together and to be honest I've  just given up worrying as no one can predict the future or the best option for our savings but things are beginning to look really serious now with the euro.

I have zero expertise in this area but for what its worth my instincts tell me that if the eurozone crashes I would prefer and hopefully be better off to have my money in Sterling.

Ireland is in receivership and god only knows how a Eurozone crash will affect this country.


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## WizardDr (1 Oct 2011)

..and have you looked at the effect on the UK?
you would hardly expect George Osborne to spell out to the UK electorate that the Euro going will be a little worse than Lehmans.

By moving your deposit to the UK - you will have a really poor interest rate but maybe a level of comfort. Receivership of course is not liquidation. And if you simply looked at the level of our government deficit and some of the astronomical wastes of money that go on day after day, do you not think that we should be looking at this ? 

In the Euro context, Germany and France want Greece to er.. reform before they bail them out.


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## Kerrigan (2 Oct 2011)

I moved money to the UK last year.  I'm no expert, just an ordinary Joe Soap but my instinct told me it was the right thing to do.  Whether I've done the right thing is yet to be seen but what I will say is I'm sleeping a hell of a lot better at night


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## WizardDr (3 Oct 2011)

If everybody did that - nobody would be sleeping at all.
It is simply an example where a solution for you is disastorous for the country fanned by celebbrity economists who tomorrow will tell you why what they predicted yesterday did not happen today. And you heard that here first.


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## e_drizzel (3 Oct 2011)

spreading your savings/investments would be the prudent thing to do.


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## 44brendan (3 Oct 2011)

It may well be prudent to spread your investments but it is another question as to whether it is prudent to incur the additional exchange rate risk involved in moving funds to Sterling. Even the mosy pessimist of economists would view the 100k deposit guarantee to be solid. I fully agree with WizarDr that the panic reaction of moving money all over Europe is further damaging our Economy and while I accept the rationale for some people in doing this I really don't see the need for it unless you have a level of savings sufficiently high enough to merit this type of risk spread.


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## WizardDr (3 Oct 2011)

I note that today's Financial Times has a headline "Treasury's fear rise over euro break -up' and that there are '..very very great risks to Britain if the euro falls apart.."

What ever can they mean?


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## 44brendan (3 Oct 2011)

Despite the sabre rattling by Germany I believe that they need to pony up on this occasion to settle both the currency and the market. This is not just a Euro issue as if the currency breaks up in any type of unmanaged fashion it will reap havoc in the marketplace. The currency market is skitterish enough at present and colatteral damage of any further problems will not be restricted to Eurozone countries.


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## e_drizzel (4 Oct 2011)

44brendan said:


> It may well be prudent to spread your investments but it is another question as to whether it is prudent to incur the additional exchange rate risk involved in moving funds to Sterling. Even the mosy pessimist of economists would view the 100k deposit guarantee to be solid. I fully agree with WizarDr that the panic reaction of moving money all over Europe is further damaging our Economy and while I accept the rationale for some people in doing this I really don't see the need for it unless you have a level of savings sufficiently high enough to merit this type of risk spread.


 
i guess i'm saying that a deposit in a given currency is like an investment in that currency. and having all your eggs in one basket currency-wise is analagous to having all your investments in one area. its not about the 100 K guarantee its about the possibility of a EURO break-up, however unlikely. i think its riskier leaving all your savings in irish regulated euro accounts. 

what level of savings do you deem sufficiently high enough to merit spreading into different currencies?


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## 44brendan (4 Oct 2011)

By re-denominating currency from Euro to sterling and depositing funds in the UK an investor is not merely spreading the investment risk he is now taking on an exchange risk. the first issue to be aware of is the exhange rate spread. I.e. There will be an initial loss due to the buy/sell currency rates offered by a Bank. The 2nd risk is the rate risk. Currently Stg deposit rates are lower than ours. The 3rd risk is the exchange risk. If Euro/Stg moves in your favour you will potentially make money. If it moves against you you will lose money. However for the transaction to make sense you would probably be investing in a longer term fixed rate product which means that the cash is tied in to the term and rate gain/loss will only come into play at the end of that term. It is a risky strategy and currently very difficult to assess what way sterlig/Euro will move in the next 12 months or so. Like any gamble it may pay off or it may not. In terms of the question of level of savings that would merit taking on a currency risk, well there is no exact answer to this. Obviously low level transactions will incur higher margin spread re exchange rate and lower rates of deposit so its probably not worth the risk on small transactions. Otherwise its an individual choice but in my view currency speculation at this time is a big gamble.


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## e_drizzel (4 Oct 2011)

44brendan said:


> By re-denominating currency from Euro to sterling and depositing funds in the UK an investor is not merely spreading the investment risk he is now taking on an exchange risk. the first issue to be aware of is the exhange rate spread. I.e. There will be an initial loss due to the buy/sell currency rates offered by a Bank. The 2nd risk is the rate risk. Currently Stg deposit rates are lower than ours. The 3rd risk is the exchange risk. If Euro/Stg moves in your favour you will potentially make money. If it moves against you you will lose money. However for the transaction to make sense you would probably be investing in a longer term fixed rate product which means that the cash is tied in to the term and rate gain/loss will only come into play at the end of that term. It is a risky strategy and currently very difficult to assess what way sterlig/Euro will move in the next 12 months or so. Like any gamble it may pay off or it may not. In terms of the question of level of savings that would merit taking on a currency risk, well there is no exact answer to this. Obviously low level transactions will incur higher margin spread re exchange rate and lower rates of deposit so its probably not worth the risk on small transactions. Otherwise its an individual choice but in my view currency speculation at this time is a big gamble.


 
the first "risk" you mention is really the cost of the tranfer which could be mitigated to a large extent by using xe.com or transfermate. 

i would consider the second "risk" a cost also. although there are some competitive rates to be had abroad e.g. nationwide international has decent rates including easy access accounts that have the same rate as rabodirect.ie.

the third "risk" is indeed a risk where you could win or lose.

leaving your savings in irish regulated euros leaves you open to devaluation should the currency union break up. this is also a risk. the question is which is riskier?


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## 44brendan (4 Oct 2011)

Sorry can't answer that one. In my own view a Euro break-up in the short term is unlikely. I'm basing that opinion on the potential financial Tsunami that a break up would cause. I can accept some rationale for those with very high level of deposits to spread their risks but unless you are looking at very significant deposits I don't see the merit in taking on an additional exchange risk. 
However I acknowledge that we live in uncertain times and some very strange things have happened over the past few years!


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## Guest105 (4 Oct 2011)

Kerrigan said:


> I moved money to the UK last year. I'm no expert, just an ordinary Joe Soap but my instinct told me it was the right thing to do. Whether I've done the right thing is yet to be seen but what I will say is I'm sleeping a hell of a lot better at night


 

I did the same thing a few months back and moved most of my savings to Britain as I don't ever intend coming back. I was delighted to avail of an excellent exchange rate. I get 3.2% interest rate not brilliant but I do like those lovely large crisp British sterling notes, somehow they appear to look much more valuable than the miserable paper thin euro


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## Kev (4 Oct 2011)

UK is not safe if the euro breaks up as they will suffer just like all the other countries involved.  I feel that Ireland will go back to sterling like it was in the 70's.

[broken link removed]

http://www.bbc.co.uk/news/mobile/business-14791490


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## elcato (5 Oct 2011)

> I did the same thing a few months back and moved most of my savings to  Britain as I don't ever intend coming back. I was delighted to avail of  an excellent exchange rate.


Surely it's not the same thing. You are now living in the UK so it makes sense to use their currency. The OP is asking about saving in different jurisdiction and currency area to where they are resident.


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## e_drizzel (5 Oct 2011)

i'd imagine they'd let the new punt devalue until our economy improves before re-pegging to sterling.


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## Daddy (5 Oct 2011)

e_drizzel said:


> i'd imagine they'd let the new punt devalue until our economy improves before re-pegging to sterling.




Which to my mind would mean that I would get a fair few more punt nua's by moving my euro into sterling now rather than leaving my money in euro's now and waiting for the devalued punt nua to arrive.


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## 44brendan (5 Oct 2011)

You are still taking a risk. Neither I nor any posters here can advise how exchange rates will fluctuate in the medium term. If your'e happy to take the gamble then you should do so but in the knowledge that it is a risk and exchange rate movements can go either way.


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## Jim2007 (5 Oct 2011)

e_drizzel said:


> i'd imagine they'd let the new punt devalue until our economy improves before re-pegging to sterling.



The days of empire are long gone and the UK is only one of a number of trading partners as opposed a dominant partner, pegging if it did occur would make more sense against the dollar or the new Mark or another strong European currency.

Jim


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## 44brendan (5 Oct 2011)

How about the Yuan!!


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## Jim2007 (5 Oct 2011)

Daddy said:


> Which to my mind would mean that I would get a fair few more punt nua's by moving my euro into sterling now rather than leaving my money in euro's now and waiting for the devalued punt nua to arrive.



It seems to me that you are making an awful lot of assumptions....

First of all that the UK is a strong economy, in reality it is not that far ahead of Italy, so I would not be at all surprised if it gets hit with some downgrades in the coming months.  There is one big difference, unlike Italy, it will not have the might of the German economy behind it if this does happen...

Despite all that has been said, the Euro is still a strong currency and the currency of our biggest trading area, so tracking the Euro would be far more important than the Pound.

In a small open economy, like Ireland, devaluations have not proven to be much of an answer, while a few economists have advocated it, it is not the general consensus.  Our exports are doing well and in general are not price sensitive, so claim that a devaluation would be the answer is questionable.

You should also remember that back in late summer may people move to the Franc on the basis that it was the safe place to be, only to see up to 20% of their savings disappear when the SNB decided to peg the Franc to the Euro!

Then of course there is the possibility the it will not happen, the Pound continues to decline or the Euro rises or both and you could loose again!

Jim2007


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## e_drizzel (5 Oct 2011)

Jim2007 said:


> The days of empire are long gone and the UK is only one of a number of trading partners as opposed a dominant partner, pegging if it did occur would make more sense against the dollar or the new Mark or another strong European currency.
> 
> Jim


 
it is our largest individual partner. one third of our imports are from the UK and 15.5 % of our exports go there. maybe not a dominant partner but big enough that it would make better sense for us to use sterling rather than euro.


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## Daddy (5 Oct 2011)

Jim2007 said:


> It seems to me that you are making an awful lot of assumptions....
> 
> First of all that the UK is a strong economy, in reality it is not that far ahead of Italy, so I would not be at all surprised if it gets hit with some downgrades in the coming months.  There is one big difference, unlike Italy, it will not have the might of the German economy behind it if this does happen...
> 
> ...





Thanks - read somewhere recently that the SNB are believed to be getting into Sterling in a much bigger way in the coming 12 months.   I know full well that nothing is certain and that includes the UK economy.   But as I said in the opening thread I just believe Sterling may be a better place at the moment.    I do appreciate the risks and I do also appreciate all the posts.  I still retain my savings in Euro but am organising an account opening in the North in the next week or so and that if things disimprove I am ready as I can be to transfer.  The worst case scenario is the closing of borders etc., etc.,


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## Jim2007 (5 Oct 2011)

e_drizzel said:


> it is our largest individual partner. one third of our imports are from the UK and 15.5 % of our exports go there. maybe not a dominant partner but big enough that it would make better sense for us to use sterling rather than euro.



And on the other 85% we just take a hit..... 

Good luck with that,

Jim.


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## Jim2007 (5 Oct 2011)

Daddy said:


> Thanks - read somewhere recently that the SNB are believed to be getting into Sterling in a much bigger way in the coming 12 months.



I'd take that with a large dose of salt!  Switzerland needs to peg to the Euro for one reason - exports!  Sterling does not come in to the equation.  Unlike other central banks the SNB is a public company that must report profits/losses each quarter and while it is acceptable to report losses on the Euro at present, getting it fingers into anything else right now would cause uproar, even if it was profitable.

Jim


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## e_drizzel (6 Oct 2011)

Jim2007 said:


> And on the other 85% we just take a hit.....
> 
> Good luck with that,
> 
> Jim.


 
the point is that the UK is our biggest individual trading partner (comparaple to the rest of the EU combined) so it makes just as much sense for us to be pegged to £ as to be part of the €.


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