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Thread: Storing Savings in Euros

  1. #1
    Yekhefah
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    Storing Savings in Euros

    K and I are very nearly back on our feet, and he has some high-paying jobs coming up. The plan is for each of us to sock $1000-1500 per month into our joint savings account every month for the next 18 months or so, and put it all down on a house next summer. The savings account is an Orange account with ING, with an interest rate just over 4%.

    I was thinking of converting all our savings into euros so that we'll be protected if the economy gets worse, and possibly wind up with a bigger sum at the end. Does anyone know if ING will do this themselves? And is that a good option, or should we just keep it all in US dollars and hope for the best?

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    God/dess Lysondra's Avatar
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    Default Re: Storing Savings in Euros

    I've found I cannot convert things within the bank of the country I am in myself, which kinda sucks, as I've tried keeping American, Australian and European currency and kept getting told, by all banks, that it's pretty much impossible to do it that way. But I'm sure there HAS to be a way, so I think Melonie can elaborate.


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    God/dess Deogol's Avatar
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    Default Re: Storing Savings in Euros

    I haven't committed to an account there yet. But it is attracting my attention.

  4. #4
    Banned Melonie's Avatar
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    Default Re: Storing Savings in Euros

    From inside the USA, it's very difficult for people of 'average' means to open foreign bank accounts ... which is the most efficient way to deal in Euros, Swiss Francs, Yen etc. The problem stems from a new requirement (a byproduct of terrorist anti-money laundering treaties) that you must actually travel to the bank in the foreign country and prove your identity in order to open a new account.

    There are a few options available to Americans living in America however. One option is foreign currency CD's which are available from online banker EverBank. See . The kicker of course is that the minimum buy-in price tag is US$10,000 . But since these CD's are held by an approved US bank the initial US dollar amount is FDIC insured (but not exchange rate gains or interest earnings).

    There is also a roundabout way to deal in foreign currencies via exchange traded funds available on US stock exchanges. There is a whole family of these funds. See . However, these funds are equities not bank balances, so there is no FDIC insurance. These funds are also somewhat dependent on the future financial health of fund manager Rydex. However, there is no minimum buy-in (other than the typical 100 share broker minimum)

    In order to seriously trade currencies (i.e. currency futures), you need a commodities brokerage account on the COMEX / NYMEX. This is certainly do-able for Americans residing in America, but it does involve a lot more financial issues than a simple stock brokerage account (i.e. line of credit). The minimum buy-ins are also fairly substantial. However, this is the only way for Americans residing in America to truly deal directly in foreign currencies. One online discount commodities broker is and a well respected full services commodities broker that will do individual investor accounts is . However, be aware that there are now a s#!tload of 'johnny come lately' commodities brokers popping up seeking to cash in on the new 'rush' of individual commodity investors ... so caveat emptor.


    As to the future of the Euro versus the US dollar, I posted another thread about major tensions now developing at the ECB as a result of rising inflation in Germany versus slow economies in Spain and Italy - which will arguably force the ECB to abandon Trichet's strict policy of controlling eurozone inflation for fear of bankrupting Spain and Italy. Also, the ECB recently printed up $500 billion in new money which was injected into the eurozone banking system, a record amount by a factor of 20 or something. These changes have prompted many to speculate that the ECB will in fact now allow the Euro to track the US dollar's decline ... which would make parking money in Euros no different than parking money in US dollars.

    ~
    Last edited by Melonie; 01-27-2008 at 09:37 AM.

  5. #5
    Yekhefah
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    Default Re: Storing Savings in Euros

    Wow, lot of information. Not sure I understand it all, but I think I'm getting it. Would it be a good idea to keep it all in the Orange account until we have $10,000 and then put that in six-month foreign-currency CD's?

  6. #6
    Banned Melonie's Avatar
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    Default Re: Storing Savings in Euros

    ^^^ IMHO with the potential volatility of the Euro, signing on for a 6 month 'contract' might be a bit risky right now. See - which makes the case that the ECB is now becoming more and more likely to allow the Euro to depreciate right along with the US dollar due to the extremely shaky economies in Spain and Italy. This has given some investors reason to pause and re-evaluate the future of the Euro in favor of super strong currencies like the Swiss Franc.

    At any rate, the exchange traded funds like FXE (Euros) and FXF (Swiss Francs) have no minimum term, no early withdrawl penalties, and don't require a minimum of $10,000 to get started. However you do wind up 'giving up' some interest rate spread versus foreign currency CD's. But this is usually not a big issue if the interest rate spread is less than 1% while the foreign currency exchange rate move vs the US dollar is in the 5-10% ballpark !

    Also worth noting is that the exchange traded funds, if held for more than a year, qualify for long term capital gains tax rates (i.e. 15%) on any positive change in principal due to exchange rate moves - as opposed to rolled over 6 month CD's being subject to ordinary income tax rates (i.e. 30%). Thus if you're looking to buy and hold, this is a difference worth thinking about.

    ~
    Last edited by Melonie; 01-27-2008 at 10:13 AM.

  7. #7
    Banned Katrine's Avatar
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    Default Re: Storing Savings in Euros

    Not a good idea. You can't predict currency volatility. Also, you will pay a commission to convert to Euro, then back to dollar when you need the cash.

    Yek, keep it simple. Save consistently into the ING account until you have a healthy cash reserve.

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  8. #8
    Yekhefah
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    Default Re: Storing Savings in Euros

    Okay then! Thank you!

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    Default Re: Storing Savings in Euros

    Here's an article about Euro being at risk:

    http://www.telegraph.co.uk/money/mai...C-mcn_21012008

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    Default Re: Storing Savings in Euros

    Take Katrine's advice and save in US Dollars. Since you are buying a quintessential US asset, i.e a home, you are naturally protected by any swings in the US Dollar. Currency changes have no effect when you are buying a US asset with a US Dollar*. It is only the imports that you have to worry about.

    If anybody knew(including Wall St) that $ will go down against the Euro in the next 18 months, they can trade currencies and make Billions.

    But, you very well know how Big Banks make bets on these kind of sure things and end up having to write down $25 Billion (And they have access to Economics and Finance geniuses, access to information and sophisticated tools. Yet they go wrong all the time)

    *In a first order level

  11. #11
    Yekhefah
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    Default Re: Storing Savings in Euros

    Yep, like I said, that's what I'll do. I just wanted to know if it was worth trying to turn a little potential profit on exchange rate fluctuation, but it doesn't look like it is. I appreciate everyone's advice.

  12. #12
    Banned Katrine's Avatar
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    Default Re: Storing Savings in Euros

    Quote Originally Posted by Yekhefah View Post
    I just wanted to know if it was worth trying to turn a little potential profit on exchange rate fluctuation, but it doesn't look like it is.
    That's actually my area of expertise (or was, once) and I can assure you, its not a very profitable asset class to trade in unless you have large sums of money and the facility to take advantage of arbitrage. I did it for years and it really wasn't worth it for the trade commissions paid. Just wanted to share that. I'm very proud of you for getting back on your feet and saving again Yek!

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
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  13. #13
    Yekhefah
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    Default Re: Storing Savings in Euros

    Thank you! K's getting better jobs these days, our cost of living is lower, and I don't want to kill myself every time I have to go to work so I can work more often. Plus I finally paid off my car. So if I average a grand a week, that gives me a comfortable living, $250 a week to savings, and another $250 a week toward paying off debt. I'm going to ride K's ass about saving too since we have that joint account. Between the two of us, there's no reason we can't sock away thirty or forty grand by next summer, and get out of debt to boot.

    Found my motivation, LOL! I want to get married, and so does he but he won't marry my debt. So the debt must go if I'm to move on with life!

  14. #14
    Veteran Member StuartL's Avatar
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    Default Re: Storing Savings in Euros

    Quote Originally Posted by Melonie View Post
    As to the future of the Euro versus the US dollar, I posted another thread about major tensions now developing at the ECB as a result of rising inflation in Germany versus slow economies in Spain and Italy - which will arguably force the ECB to abandon Trichet's strict policy of controlling eurozone inflation for fear of bankrupting Spain and Italy.

    ...

    These changes have prompted many to speculate that the ECB will in fact now allow the Euro to track the US dollar's decline
    ~
    I was chatting about this the other day with someone. I can't say much but he has friends very connected in this arena and they have not given him this impression at all. I'll try and subtly pick his brains again next week...

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    Veteran Member XxAmber89xX's Avatar
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    Default Re: Storing Savings in Euros

    I just think that if you are buying Euro's today, you arrived to the party 5 years late... unless you are hoping for a 5-10% gain... hardly worth it IMO, especially when that 5-10 is so speculative in nature.
    Oh Canada, we stand on cars and freeze...

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    Veteran Member Robertjordan's Avatar
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    Default Re: Storing Savings in Euros

    Quote Originally Posted by Katrine View Post
    Not a good idea. You can't predict currency volatility. Also, you will pay a commission to convert to Euro, then back to dollar when you need the cash.

    Yek, keep it simple. Save consistently into the ING account until you have a healthy cash reserve.
    I was going to reply but I always have to check Katrine's response first as it's usually the same or close to what I'd say.

    I agree with this concise and accurate assessment. What I would add is that the US dollar is very low against the Euro right now. So you'd be buying it when it's at an all time high. The only thing people like to buy when its highly priced is investments. It should be the reverse.

  17. #17
    AlexxaHex
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    Default Re: Storing Savings in Euros

    I just want to say that I am really happy for you and your current state of stability. If K doesn't ask you to marry him I will fly to Portland and strangle him.


  18. #18
    Banned Melonie's Avatar
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    Default Re: Storing Savings in Euros

    I was chatting about this the other day with someone. I can't say much but he has friends very connected in this arena and they have not given him this impression at all. I'll try and subtly pick his brains again next week...
    This would be GREATLY appreciated !!!

    From the point of view of the 'tin foil hat' crowd on Wall St. they apparently see two scenarios. #1 Trichet follows his previous policy of setting Euro interest rates in accordance with eurozone inflation rates ... which makes Germany happy and nails Spain and Italy to the wall ... and which causes the US dollar to fall even further versus the Euro ---- ot #2 Trichet starts setting Euro interest rates in accordance with eurozone growth / recession statistics ... which makes Spain and Italy happy and causes the Euro to more or less track the US dollar ... but which will probably prompt Germany to start using Deutsche Marks again !

  19. #19
    God/dess Lysondra's Avatar
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    Default Re: Storing Savings in Euros

    See, I actually know someone who works in banking and transferring of funds between currencies to keep the bank in the black with money. He does the actual PROGRAMMING of the software designed to predict where the money will go economically.

    And let me just tell you, Mel, without being too obvious. I think you're wrong about the Euro.


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    Default Re: Storing Savings in Euros

    Quote Originally Posted by Lysondra View Post
    See, I actually know someone who works in banking and transferring of funds between currencies to keep the bank in the black with money. He does the actual PROGRAMMING of the software designed to predict where the money will go economically.

    And let me just tell you, Mel, without being too obvious. I think you're wrong about the Euro.
    * Just because he does the programming doesn't mean he can predict.
    * All predictions like weather are only probabilities.

    If a bank can predict anything, they can bet their whole assets on that sure thing and make Trillions of dollars. Have you seen any bank make Trillions of Dollars? No. In fact all banks make money by charging fees (either to consumers by nickel and diming them or to corporations by just sending them bills of millions of dollars).

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    Veteran Member XxAmber89xX's Avatar
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    Default Re: Storing Savings in Euros

    Not to mention the autopilot software is built to be conservative and risk adverse.
    Oh Canada, we stand on cars and freeze...

  22. #22
    Yekhefah
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    Default Re: Storing Savings in Euros

    Quote Originally Posted by AlexxaHex View Post
    I just want to say that I am really happy for you and your current state of stability. If K doesn't ask you to marry him I will fly to Portland and strangle him.

    I showed him that, LOL! I'm not completely stable yet. I'm just getting there. But thanks!

    I'm so tickled that you and I both got out when we needed to and found better lives. It's good!

  23. #23
    Banned Melonie's Avatar
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    Default Re: Storing Savings in Euros

    I hope that anybody that was considering shifting from US dollars to Euros did so early. After yesterday's second fed rate cut in two weeks the Dollar is again at record lows i.e. 1.49 to the Euro !!! Thus anybody who had bought a Euro CD when the exchange rate was 1.47 has already earned 1.5% in capital gains on top of the CD interest !

    Of course if you had gone for a Swiss Franc CD instead of a Euro CD you'd be sitting on a 2% capital gain due to the exchange rate move !!!

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