What is the safest currency to put your money in?

C

clare14

Guest
What should you look for when deciding what currency to put your money in? The below could affect your investment.
Inflation:I realise that inflation can undermine the value of your investment so the Indian rupee (inflation is 8%) is not a good idea.
Devaluation: Sterling and dollar is devaluing so undermining these values
Euro: may collapse or devalue if debt forgiveness is given

So, what currency should you put your money in?
 
swiss franc maybe, i have the same question myself, nowhere seems safe as global currencies are interrelated,
 
There is no 100% safe currency.

If you have a large sum then one option is to spread it over multiple currencies.
 
Pure speculation

Currencies carry lots of risk but no expectation of a positive return don't do this

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If you had bought Sterling, Canadian Dollars and Yen in Jan 2001 you would have lost 3.10%pa in Sterling, -0.84%pa in Yen and only made 0.12%pa in Canadian Dollars against the Euro. The US$ would have lost 3.98%pa over this period against the Euro.

We have recently launched a safety first portfolio
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When looking to diversify into other currencies you need to consider a few things:
1) how politically stable is the country
2) what are the public and private debt levels of the country
3) does the country have a consumption or production based economy
4) what is the country's track record on deficit spending
5) what is the central bank's track record in direct currency intervention
6) how open and free is the economy

Personally I own CHF, CAD, AUS, gold and silver directly. Unless humans do a u-turn on 6000+ years of adoring precious metals, the latter two will never go to zero, while any fiat currency can, and possibly will go to zero eventually. Bear in mind that our current world wide fiat system is only 40 years old and has caused more economic havoc than anything else. I hold these assets not as investments but in order to preserve wealth.
I also have exposure to Nordic and Asian currencies through equities, and significant exposure to oil, gas, base metals and agricultural products through equities.

Bottom line is that I do not trust politicians or central bankers. Countless commentators glorify the success of central banks like the Federal Reserve. But all you have to do is scrutinise its number one mandate, i.e. provide price stability, and the fallacy of this glorification becomes evident. In 98 years the Federal reserve has kept prices stable by decreasing the value of the dollar by 97%, i.e. prices have pretty much gone up 33 fold.

Marc said:
We have recently launched a safety first portfolio [broken link removed]
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Marc, could I ask you whether this product provides any safety against the devaluation of the Euro?
 
Chris,

Devaluation of the Euro against what?

A short-dated high credit fixed income portfolio is a good hedge against inflation and indeed the original research into this strategy was called an inflation hedge fund.

So, your point about central banks inflating away the debt is addressed by this approach.

Secondly, if the Euro devalues against other currencies then the bond markets will price in a currency differential into the various yield curves around the world. Since half of the portfolio is invested in Global Bonds any relative yield differential will show up in higher expected returns for a Euro investor.

The non Euro zone bonds are mainly issued by Switzerland, Canada, Australia etc and so the relative security of these economies is also built into the portfolio.

So, yes we feel that this approach hedges against default risk, interest rate risk, inflation risk and also some form of relative devaluation of the Euro against other currencies.

The portfolio excludes precious metals, equites, real estate etc because these assets are subject to far more price volatility and tend not to appeal to deposit based savers.

This portfolio is designed specifically as an alternative to Irish bank deposits.
 
Marc said:
Devaluation of the Euro against what?
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Against real assets and everyday prices of goods and services.

As far as I know inflation linked bonds use officially stated price inflation figures. With such investments you are trusting the very institutions that create inflation (governments and their central banks) to tell you what price inflation actually is. In my opinion not a wise move.

Yes, that would be a good hedge. It just doesn't seem clear from the prospectus you linked how much of the portfolio was in non-Euro denominated assets. I would also agree that it is a good alternative to Irish bank deposits.
 

Chris - regarding the CHF, CAD, AUS you hold, are these accounts you have with Irish or foreign based banks? If so, what is the best way to go about opening such accounts?
I have an appointment to open a euro account with Ulster Bank in Newry next week, so might see if they can open other currency accounts too
 

Except for a very small amount of AUS that I have in a PTSB account, all my foreign currency holdings are in Germany. I looked into accounts in Switzerland, but this was proving too difficult for the relatively small amount of cash that I have, it also changes things in regards to taxation.

There is an extensive thread about people's experiences with German banks here: http://www.askaboutmoney.com/showthread.php?t=147521
 
Marc, whats the min amount you can invest in the safety first portfolio.Your website mentions values of 50000 and 250000 for some of your accounts.I presume these are different types of investments that you have.I am interested in this portfolio but i would like to know how much i would need to invest.
 
maybe the icelandic krone is safe as its already suffered its crisis ?

just remember that professional independent advice is what you need. and even then the buck stops with you and your decision.
 
Marc do you not think that 50000 is a bit high to expect from some bank depositors,not everyone has that kind of savings but would still like to have somewhere safe to put what they do have.This is a very interesting investment and im sure you would get a lot more people to take a look at this product if the min investment was lower.I was very interested but 50000 was a bit steep for me but best of look with it,i hope it is a sucess for you.
 
Ravima said:
tinned food
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Fantastic answer Ravima!!!

If anyone has got what will appear as the best answer in a year to come may I also have the lotto numbers for the upcoming next draw?

I have such a few certainties as regards finances nowadays...

In my opinion it is best to diversify as much as you can as our good Jill Kerby keeps writing on the Sunday Times!
 
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