100K Euro to invest Turkish Lira

[Complainer]

if it keeps moving the wrong direction you get out i.e exchange it back into euros.

At a loss, right? Just that the way you outlined it, it seemed to be a guaranteed winner.

 

[Boros]

no no ....... is there ever such a thing. =)

it is however a pretty good money spinner with limited losses. If it goes against you with the interest you receive, you are likely to end up close to what you started with, with the potential of making a few bob.

 

[Complainer]

it is however a pretty good money spinner with limited losses. If it goes against you with the interest you receive, you are likely to end up close to what you started with, with the potential of making a few bob.

Sorry to labour a point, but this depends greatly on how far it goes against you. If it goes against you by more than 10%, then you don't end up with what you started out with.

What kind of fees/commissions will brokers take out of these transactions?

 

[Boros]

it all depends on timescale

Currency's fluxuate all of the time (particularly TRY) as you know and within a month period the rate may decline 10% and the increase 15% thus giving you scope to buy low and sell at the top.

It is a waiting game .... yes there is the small potential that it may take months for the rate to return to an acceptable rate but you would be still getting the 10% interest.

It is not for anyone who cannot be flexible with their funds.

only fees would be on the currency transaction, depending off the amount around 0.5% off interbank, of which would be factored into the rate at his end so wouldn't be taken out of the clients profit.

 

[Complainer]

it all depends on timescale

Currency's fluxuate all of the time (particularly TRY) as you know and within a month period the rate may decline 10% and the increase 15% thus giving you scope to buy low and sell at the top.

It is a waiting game .... yes there is the small potential that it may take months for the rate to return to an acceptable rate but you would be still getting the 10% interest.

It is not for anyone who cannot be flexible with their funds.

You seem to be determined to spin this as a 'no lose' option. I would expect that any serious investor would take you more seriously if you are serious about the risks involved. It is not just a matter of timing. There is a real risk that the rate will decline, and will not recover - ever.

if there was a guaranteed 10% rate available, every investment fund in the world would be beating a path to your door. They are not, for good reason.

only fees would be on the currency transaction, depending off the amount around 0.5% off interbank, of which would be factored into the rate at his end so wouldn't be taken out of the clients profit.

Again, this sounds like spinning to confuse novice investors. What exactly do you mean by 'factored into the rate at the end so it wouldn't be taken out of the clients profits'? How can the broker take any fee without it coming out of the clients profits? What happens to the broker's fee if the client doesn't make a profit?

 

[Boros]

thanks for your reply complainer

firstoff i would like to stress that it was not my intention to spin this as a 'no lose' option as with any investment there is always a proportion of risk involved , and if it has come off like that i apologize.

you are right , there is a risk that the rate will decline and not recover but going on the last 9 months (which has been quiet extraordinary as we all know) the rate has increased and decreased many times allowing this option of work.

i personally have not got an interest account in turkey at 10% or at any rate but i have been told by two separate individuals that i have done business with that this is the case, which i believe.

I do not know of the T and C's of the accounts, but i would imagine that the 10% would only be offered for a full year of cleared funds and be reduced if the funds were taken out after 6 months for example.

With regards to your query about the currency transaction, this is something i am 100% certain of.

Say the current exchange rate is2.084 TRY for 1 Euro which is currently close to

if we were waiting for the rate to move to 2 try for 1 euro to move all of the TRY into euros.

to obtain this rate for the client the actual exchange rate would have to get to 1.99TRY to Euro.

There for this does not cost the client anything as he would receive the correct amount of Euros that he wanted and the FX broker receives his 0.5% fee.

I hope this has cleared up some of your questions

 

[Complainer]

thanks for your reply complainer

firstoff i would like to stress that it was not my intention to spin this as a 'no lose' option as with any investment there is always a proportion of risk involved , and if it has come off like that i apologize.

you are right , there is a risk that the rate will decline and not recover but going on the last 9 months (which has been quiet extraordinary as we all know) the rate has increased and decreased many times allowing this option of work.

Thanks for the clarification.

With regards to your query about the currency transaction, this is something i am 100% certain of.

Say the current exchange rate is2.084 TRY for 1 Euro which is currently close to

if we were waiting for the rate to move to 2 try for 1 euro to move all of the TRY into euros.

to obtain this rate for the client the actual exchange rate would have to get to 1.99TRY to Euro.

There for this does not cost the client anything as he would receive the correct amount of Euros that he wanted and the FX broker receives his 0.5% fee.

Unless I'm misunderstanding something, it is nonsense to suggest that this does not cost the client anything. It costs the client the difference between the 2.00 and the 1.99 rate. Any money the broker makes comes from client. The client also suffers the risk that he now has to wait for the rate to hit 1.99, instead of executing at 2.00. It is indeed possible that it would never hit 1.99, and he could end up losing on the entire transaction because of not getting out at 2.00

I'm not suggesting that there is anything wrong with the broker charging a fee, once it is detailed up front. The days of trying to hide fees are gone (I hope).

 

[Boros]

i agree with you completely that it is correct that "there isn't anything wrong with the broker charging a fee, once it is detailed up front". With something like this it could only work if both sides knew exactly what was going on at all stages and the risk involved.

But if it all goes as planned , technically the difference in exchange rate does not cost the client anything in monetary terms, (if anything very little) you are right that they do have the risk that the rate would not hit 1.99 but as said before the investor and the broker would know this upfront.

And if it didn't look like 1.99 was going to be hit, the investor would have to make a decision to buy at 2 and receive 2.01 or to wait and hope it does.

 

[callybags]

Kauto Star was mentioned in another thread recently....

 

[Boros]

one other thing that might be a problem is being able to open an account in turkey as have heard from other people that you need to open it with an Turkish address. OmnisFX is the broker than i have seen this done with.

 

[Lightning]

Garanti Bank are probably the biggest bank in Turkey so I wouldn't be too concerned about that. They are probably more secure than the Irish banks!

Thanks, a few questions ...

Has anyone any experience with opening a bank account with Garanti Bank? How do you start the process? Do you ring them and ask for a non resident application form?

 

[bigred]

If you hedge the EURTRY forward you will pay away the EURTRY interest rate differential / pickup.. e.g. EURTRY spot = 2.08. I year forward = 2.23 so if you were for example to...

1) Covert EUR to TRY
2) Put TRY on deposit for 1 year
3) at the same time agree a 1 year forward FX rate to covert you expected TRY deposit proceeds back to EUR

...then you will end up in no better position than just putting EUR on deposit to begin with. In fact you will end off much worse as you will be hit with and FX spread on both sides of the EURTRY.

The most efficient way to exploit this type of 'carry' trade is to simply put you EUR on deposit and overlay it with a CFD for a EURTRY forward. The forward rate you achieve will incorporate the interest rate differential i.e. the forward rate you get will be well above the prevailing spot rate. When the CFD matures it will be closed out at the prevailing spot rate and provided it has not risen beyond your original forward rate you will secure a profit. Another way to look at it is the interest rate differential you earn is your cushion against FX movements, provided the 'carry' you earn is > than any spot movements again you then the strategy pays off.

Carry trades like this are highly correlated to equity or broader ‘risk’ movements so if equities are to tank expect this trade to blow up!.. be warned. Same goes for all the very high yielding currencies e.g. ZAR, BRL etc..