# Foreign Currency On Deposit



## Deleted member 58475 (14 Dec 2010)

I'm considering opening an Australian Dollar bank account (outside Ireland), as a protection against the devaluation of a (second tier) Euro within PIIGS and am a little unsure of the computations. Leaving exchange rate fluctuations aside, can somebody explain to me how it would work in actual savings terms if I do the following:-
1) Move €100 to AUD at an exchange rate of 1:1
2) A "new" Euro is created in PIIGS at a devalued rate i.e. I assume revalued against the AUD
3) I move my AUD back to the new PIGGS Euro

Have I protected myself against devaluation, should I have left my €100 in my Irish bank account?


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## Lightning (14 Dec 2010)

You have protected yourself against any potential devaluation if you convert to AUD. 

AUD has soared in value lately, you take on big AUD EUR FX risk.


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## rekhib (14 Dec 2010)

Hi butterscotch, that's the theory all right. The rate isn't quite as bad as 1:1 just yet mind you! It will cost you a bit transferring money to an AUD a/c because it's outside of SEPA/EU &c, I think I paid about E30 the last time. The other thing that you'll have to decide for yourself is when you think the new PIIGS currency will be ripe / fully devalued, i.e. if such an event were to occur, the new currency would lose a significant proportion of its value that day however because it wouldn't be anchored to anything vaguely resembling security, i.e. USD or DM, it would continue to decline in value over time. By the way, St George (backed by Westpac) have a good a/c which pays around 3.5% with no charges.


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## Lightning (14 Dec 2010)

Investec will pay you over 5% on an AUD account, better than the 3.5% you mention.


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## Deleted member 58475 (14 Dec 2010)

Thanks Ciaran T and Rekhib,

Can you give me more details on St. George and Investec that you mentioned (web link?)

Finally, what is the best way to maximise my exchange rate when transferring to my new AUD account?


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## Lightning (14 Dec 2010)

Use a currency broker, like www.currency.ie 

As per an article on the Sunday Independent, Investec ( www.investec.ie ) pay 5.75% on AUD 1 year term deposits:



> Investec's 12-month fixed currency deposit accounts pay 1.1 per cent interest on US dollars, 1.85 per cent on sterling, 5.75 per cent interest on Australian dollars and 0.55 per cent interest on Swiss francs.


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## Deleted member 58475 (14 Dec 2010)

Thanks CiaranT,

This is all new to me, so excuse all the questions. I assume therefore that it is cheaper to use currency.ie than to go through banks. Can someone explain for me how I get my current savings (in € in bank A to my new AUD account in bank B) via currency.ie. A step by step would be useful.
Thanks,


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## ecoman (15 Dec 2010)

*Australian dollar euro exchange rate*

Call them and fund out, they're in Dublin 

Outlook for Australian dollar us probably brighter than euro but you never know what's around the corner.

Interest rate will be higher but you will pay tax on it like anywhere else


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## rekhib (15 Dec 2010)

Here is the link for St George's a/cs: [broken link removed] The 5.75% is far more competitive than the 3.5% but the 3.5% is instant access, it's online and has no fees. As ecoman mentioned, we're in turbulent times so instant access, IMO, is of paramount importance. Also, Ciaran which deposit protection scheme would an Investec AUD FX deposit account fall under? 

The last time I used a currency broker, I actually got a better rate with my own bank. Do shop around because the amount that you're transferring will greatly impact the rate you can secure. Generally the currency brokers work by providing an account for you to transfer the money to, along with a wire instruction that you complete, i.e. with your receiving account details, you send the money off and it arrives quick smart, far quicker than your bank I would hasten to add.


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## daymoh (15 Dec 2010)

rekhib said:


> Here is the link for St George's a/cs: [broken link removed] The 5.75% is far more competitive than the 3.5% but the 3.5% is instant access, it's online and has no fees. As ecoman mentioned, we're in turbulent times so instant access, IMO, is of paramount importance.



For St George, one of the application conditions is that you need to be an Australian resident to open an a/c..


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## rekhib (15 Dec 2010)

daymoh said:


> For St George, one of the application conditions is that you need to be an Australian resident to open an a/c..


 
Bizarre. I'm an Irish resident and they even post my statements to my Dublin address. Apologies for the mis-direction if that is the case.


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## Lightning (15 Dec 2010)

rekhib said:


> Also, Ciaran which deposit protection scheme would an Investec AUD FX deposit account fall under?



From January 1st 2011, you are protected up to the AUD equivalent of 100,000 EUR.


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## Deleted member 58475 (15 Dec 2010)

Ciaran,

1) Who's guarantee is this?
2) When does the guarantee end?
3) What is the value of the guarantee if it is a joint account?


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## Savvy Row (15 Dec 2010)

Apparently, if you open a foreign account, you are liable for tax. Does this mean tax on the interest (like DIRT) or does it mean that the lump sum that you lodge is taxed as if it were income? If so, maybe you could end up paying 20% tax?


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## Lightning (15 Dec 2010)

butterscotch said:


> Ciaran,
> 
> 1) Who's guarantee is this?
> 2) When does the guarantee end?
> 3) What is the value of the guarantee if it is a joint account?



1) FSA
2) It doesn't
3) From January 1st 2011, the FSA guarantee 100,000 EUR or equivalent currency in FSA regulated banks. I guess it is 200,000 EUR for a joint account.



Savvy Row said:


> Apparently, if you open a foreign account, you are liable for tax. Does this mean tax on the interest (like DIRT) or does it mean that the lump sum that you lodge is taxed as if it were income? If so, maybe you could end up paying 20% tax?



You must declare your deposit interest to the Revenue and pay 27% DIRT. 

You are exempt for any local savings interest tax in another country as a non resident.


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## Deleted member 58475 (15 Dec 2010)

Thanks again Ciaran,
Just to be absolutely clear, If I open an Investec AUD 12-month fixed currency deposit account @ 5.75 per cent interest, then all three answers above will apply.
What is FSA?


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## Lightning (16 Dec 2010)

FSA = Financial Services Authority. i.e. the UK regulator.


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## Tuttlinghorn (16 Dec 2010)

it seems odd to me that Investec are offering different deposit rates on different currencies ... is it connected with prevailing dep rates in Australia ? While there is FX risk in transferring to any other currency, seems like the (relatively) high rate on offer for the fixed term AUD Investec account could act as a buffer should the currency drop a lot .... am I missing something ? 
Also - off topic slightly I know ... anyone know what the guarantee scheme in operation in Switzerland is ? (as I write this question I'm thinking how crazy this all is ... questioning the stability of UBS ... but i suppose that's just the stage we are at!)


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## Tuttlinghorn (16 Dec 2010)

just answered the swiss question I think ..  in case anyone is interested:

D_eposits on a Swiss bank account are guaranteed by a collective organisation financed by the banks. The limit is of *CHF 100'000* per account holder     (equivalent to *$90,000 or EUR 68,000 or   £63,000*). It also  protects non-Swiss residents who have accounts in Switzerland. It also  covers deposits on foreign currencies, up to the equivalent of CHF  100'000. If a client has several acccounts in the same bank, the global  limit is CHF 100'000. If a client has several accounts in different  banks, the limit is CHF 100'000 per bank._


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## Deleted member 58475 (18 Dec 2010)

Ciaran,

Looking at the Investec.ie website, I see that they mention "In July 2002 Investec became the first South African group to list in London and Johannesburg by implementing a Dual Listed Company's Structure"
Which of the companies is the one that operates in Ireland?
Secondly, If you go to the credit ratings on the same website, what interpretation should I take from this regarding risk on an AUD deposit account for 12 or 24 months?


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## Lightning (18 Dec 2010)

Tuttlinghorn said:


> it seems odd to me that Investec are offering different deposit rates on different currencies ... is it connected with prevailing dep rates in Australia ?



This is totally normal. Deposit rates are primarily linked to base rates in that currency zone. The ECB base rate is 1%, the Australian base rate is much higher.




butterscotch said:


> Ciaran,
> 
> Looking at the Investec.ie website, I see that they mention "In July 2002 Investec became the first South African group to list in London and Johannesburg by implementing a Dual Listed Company's Structure"
> Which of the companies is the one that operates in Ireland?
> Secondly, If you go to the credit ratings on the same website, what interpretation should I take from this regarding risk on an AUD deposit account for 12 or 24 months?



Investec in Ireland has the same parent as Investec in London, which is Investec in South Africa. 

If your deposit is under 100,000 EUR equivalent, then you are fully protected by the FSA/UK government.


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## Deleted member 58475 (19 Dec 2010)

Ciaran,

Can you clarify exactly what the FSA guarantee means (given that you have to apply for *compensation* in case of a default). Is it a situation that they guarantee "up to" £100k per depositor, or will you be absolutely guaranteed that you will receive every penny that you have invested, up to the limit. Is there a chance, once a default happens, that the UK Government will look after the UK depositors first, then share out whatever is left to deposits offshore?


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## Lightning (19 Dec 2010)

It is not 100,000 GBP, it is 100,000 EUR or local equivalent. 

There are currently no provisions to differentiate between Irish deposit holders and UK deposit holders. The FSA have to compensate both, if the bank is FSA regulated.

An Irish sovereign default might throw some rules out the window, but it would be hard to see how the UK government would not stand by their 100,000 EUR deposit guarantee with FSA banks. There are not many banks in Ireland that are covered by the FSA guarantee. Separately, obviously, an Irish sovereign default might render the Irish regulated banks unable to compensate deposit holders.


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## messyleo (19 Dec 2010)

As Investec are operating in Ireland, do they automatically deduct the DIRT tax for you on foreign currency deposits, or just on their euro deposit accounts?


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## Lightning (20 Dec 2010)

Fairly sure that they would deduct DIRT on both. Why not give Investec a call and confirm.


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## messyleo (21 Dec 2010)

gravitygirl said:


> As Investec are operating in Ireland, do they automatically deduct the DIRT tax for you on foreign currency deposits, or just on their euro deposit accounts?




I contacted Investec.ie and just to confirm they do deduct DIRT on foreign currency accounts, so individuals do not have to return it themselves to the revenue.


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## joe sod (24 Dec 2010)

*what about canadian dollars*

i think the australian dollar has risen too much, i cannot see that being sustained, obviously the high interest rate on offer in australia has pushed up its value along with the mining boom, any hiccup in china which is now being widely predicted will have a very big impact on australia considering its asia centric economy now. However i think a much safer bet is canada, its currency has risen against euro but not to the same extent as australia, it is much more diversified than australia, and has been wary of allowing its currency to appreciate too much in order to preserve its exports to the US and europe, i think canada is much more aligned to the US and europe aswell as asia. Its currency will more than likely keep appreciating slowly due to its strengths.


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## Deleted member 58475 (24 Dec 2010)

I agree. Australian Dollar is not a good bet at the moment, as it's too strong against the Euro. Anybody know of any Canadian Dollar deposit accounts giving a decent rate of interest?


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## farmerette (24 Dec 2010)

joe sod said:


> i think the australian dollar has risen too much, i cannot see that being sustained, obviously the high interest rate on offer in australia has pushed up its value along with the mining boom, any hiccup in china which is now being widely predicted will have a very big impact on australia considering its asia centric economy now. However i think a much safer bet is canada, its currency has risen against euro but not to the same extent as australia, it is much more diversified than australia, and has been wary of allowing its currency to appreciate too much in order to preserve its exports to the US and europe, i think canada is much more aligned to the US and europe aswell as asia. Its currency will more than likely keep appreciating slowly due to its strengths.


 
excellent post , traditionally the aussie dollar is not that strong , its current rise is unprecedented and with talk of a slowing china , it could very well have peaked

as for the canadian dollar , rising oil prices will help the canadian economy and the U.S ( its biggest trading partner ) seems to be recovering well to boot 

another safe bet is likely to be the swiss franc , is that currency ever down


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## Deleted member 58475 (24 Dec 2010)

Same question then. Anybody know of good deposit rates for swiss francs


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## Lightning (24 Dec 2010)

Not a good CHF rate but PTSB are one of the few retail CHF deposit options in Ireland:

[broken link removed]


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## joe sod (24 Dec 2010)

interest rates in canada are very low about 1.5%, this is a deliberate policy to try and prevent currency appreciation especially against the US dollar, however it is still a safe bet because it is appreciating slowly, also the canadians will increase intersest rates if the economy grows too fast or if the US dollar appreciates, both of which are likely, in australia with already high interest rates and a hiccup in china likely, interest rates will fall along with the aussie dollar. Australia is now very highly dependant on asian growth


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## Deleted member 58475 (5 Jan 2011)

Have decided against AUD deposit, as it is too strong against the Euro at present. Anybody know where I could open a Canadian Dollar deposit account with a reasonable interest rate. Must be an account that I can manage online and preferably outside Ireland (maybe in Europe somewhere)


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## Troy McClure (5 Jan 2011)

I came to the same conslusion. I emailed some Canadian banks and its seems a no no. They dont seem to do non resident accounts. 

I asked somone in investec, if you have an account in another currency with them is it safe from any interference from the authorities here, should the Euro breakup?. 
I asked this as their foreign currency accounts hold the money IN Ireland and come under regulation here with DIRT deducted.
They couldn't give absolute assurances and referred me to ask the government about current legislation. I thought this unusual as you would think their own solicitors would have a fairly definite take of the legislation thats currently in place. Thats a concern as that why I am doing it in the first place. 
If anyone is in the know on this subject pray tell..


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## Troy McClure (5 Jan 2011)

butterscotch 
Canadian rates are very low. The banks in Canada are lower than Investec.
You dont look at Canada for the return.


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## Lightning (6 Jan 2011)

butterscotch said:


> Have decided against AUD deposit, as it is too strong against the Euro at present. Anybody know where I could open a Canadian Dollar deposit account with a reasonable interest rate. Must be an account that I can manage online and preferably outside Ireland (maybe in Europe somewhere)


 
Ring HSBC, I am told their AUD rates are okay. 

[broken link removed]


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## Deleted member 58475 (6 Jan 2011)

The Investec rates on AUD are actually great. My worry is twofold.
1) the credit rating of the Investec.
2) the currency exchange rates. EUR has lost in the region of 13%-15% against CAD and therefore transferring back to EUR would incur big FX losses.

My reason for wanting to get into another currency is simply to hedge against a potential devaluation of a PIIGS Euro (should it become  2-tier Euro). I'm not necessarily looking for huge returns on deposit interest (although that would be a bonus). Internet banking would be a prerequisite for me.

I share Troy's concerns. If the government at any point decides to "freeze" irish deposits, does this include a)deposits in Ireland with non-Irish banks? b) deposits in Ireland in currencies other than Euros. Remember, the freeze decision will come out of the blue, with no advance warning, as the intention will be to catch people before they can withdraw.

Given my comments in the first paragraph, has anybody any advice?


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## Art (6 Jan 2011)

I agree with the points re that AUD that it is too strong vs the Euro at the moment - the same applies for the CHF. However I have also looked at the CAD vs the Euro since 2002 and it too is much stronger against the euro today than it has typically been over that eight year period. I am going to put my monies into USD as I believe that this will be the "haven currency" that people will choose to buy when the Euro comes under threat notwithstanding the weaknesses in the US economy. Also having looked at its history the current rate vs the euro is pretty good.


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## farmerette (6 Jan 2011)

Art said:


> I agree with the points re that AUD that it is too strong vs the Euro at the moment - the same applies for the CHF. However I have also looked at the CAD vs the Euro since 2002 and it too is much stronger against the euro today than it has typically been over that eight year period. I am going to put my monies into USD as I believe that this will be the "haven currency" that people will choose to buy when the Euro comes under threat notwithstanding the weaknesses in the US economy. Also having looked at its history the current rate vs the euro is pretty good.


 
i have 50 k in US dollars , i gained big time in the three or four weeks coming up to christmans but most of l my gains have been wiped out since xmas as the euro has rallied against the dollar , now would be a good time to get into dollars as the run on portugal hasnt yet appeared 

the dollar however is very volatile and while it will most likely rally when the next european country gets attacked by the market  , with regular money printing by the fed , its long term outlook is weak weak weak ,  the swiss franc is a bomb proof currency , while deposit interest is zero , it really is a fail safe currency , australian and canadian dollar has its good and bad time but the franc is solid as a rock , only downside is buying into the thing


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## Shepherd (6 Jan 2011)

farmerette said:


> i have 50 k in US dollars , i gained big time in the three or four weeks coming up to christmans but most of l my gains have been wiped out since xmas as the euro has rallied against the dollar , now would be a good time to get into dollars as the run on portugal hasnt yet appeared
> 
> the dollar however is very volatile and while it will most likely rally when the next european country gets attacked by the market  , with regular money printing by the fed , its long term outlook is weak weak weak ,  the swiss franc is a bomb proof currency , while deposit interest is zero , it really is a fail safe currency , australian and canadian dollar has its good and bad time but the franc is solid as a rock , only downside is buying into the thing



Hi Farmerette,
What do you mean by the downside of buying into CHF - do you mean the FX costs?


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## Troy McClure (6 Jan 2011)

Almost everyone I read of note expects the US dollar to get weaker. In my view this would be out of the frying pan into the fire. I agree it's a safe currency but whats they point if your motive is to protect the value of your savings and the US dollar slides.
In my view the Canadian dollar of the most stable of the lot.


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## dec1892 (6 Jan 2011)

CiaranT said:


> Not a good CHF rate but PTSB are one of the few retail CHF deposit options in Ireland:
> 
> 
> CiaranT, do you know what PTSB charge per annum for someone to place cash in a CHF deposit account? Also, how save would you consider PTSB relative to Rabo, Nationwide UK, UB??


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## farmerette (7 Jan 2011)

Shepherd said:


> Hi Farmerette,
> What do you mean by the downside of buying into CHF - do you mean the FX costs?


 
most currencys are weak against it , i mean were you to buy into it today with a weak euro , were the euro to bounce back ( unlikely in the short term i know ) against the franc  , it could be a case of buying in high , getting out low , my point is  , is it risky getting out of a currency when its very low and getting into another one ( even one as solid as the franc ) when its very high

just asking


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