Open GBP deposit account or convert to Euro and invest

[noel_k]

I have a cheque of £46,000 (GBP) on the way to me following the sale of some Standard Life Plc shares. Sold 16,571 shares @ £2.80 but I am just about breaking even because I bought them when there was 66 pence to the Euro as opposed to 88 pence now.

I've contacted Investec and I seem to have two options. (Presumably, I'd have similar options with others but they are offering a good rate on Euro deposits.)

Option A - Convert the cheque to Euro, take the hit on the woeful exchange rate, and invest in Euro at 6.5% on the 1 year bond (or whatever the rate is reduced to tomorrow evening when they withdraw the 6.5%).

Option B - Open a 1 year fixed deposit GBP account with them at 3.5% and see if there is any improvement in the fortunes of the pound sterling over the next year

Any thoughts on my dilemma? Any other options? (I suppose I've stopped my stock market gambling but the currencies market seems even more risky and less predictable!)

 

[eggerb]

Do some maths and see if you want to take the risk of steling falling further:

Today your GBP 46,000 is worth approx €55,273 (at a 0.88 rate). Invest that and it is worth €55,670 (€55,273 + 6.5%) in a year.

Guessing where sterling is going is crystal ball stuff, so lets see what rate it would need to be to get €55,670

£46,000 + 3.5% = £47,610. You would need sterling to be at 0.855 to have the same amount in euro. £47,610/0.855 = €55,684

You would need to factor in DIRT as well. I don't know how FX gains are taxed.

Therefore, if sterling is worth more than 0.855 next year, you are ahead.

 

[gallogly]

as far as I know revenue does tax personal FX profits. This is what I was told when I tried to claim an FX loss.

 

[Slim]

Today your GBP 46,000 is worth approx €55,273 (at a 0.88 rate). Invest that and it is worth €55,670 (€55,273 + 6.5%) in a year.quote]

Is that correct? €55,273 x 1.065 = €58,865 according to my calculations!