Tip 61: Gain from AUD deposits (Forex)

In one of my previous tips, I mentioned about setting up a multi currency account at your bank to make deposits in currencies other than your home currency especially when deposit interest rate yields are not attractive in your country. Recently in one of my term deposits, I made 16,500 yen (USD$154) on a 5 month deposit placed in Australian dollars on a capital of AUD$2000. Thats a handsome yield of around 9% on my capital for just a period of less than half a year. The gains would have been much higher on term deposits of much higher amounts and if I selected financial institutions that offered better exchange rates and term deposit interest rates with no administration fees. I started the deposit around January 2008 when the AUD/JPY exchange rate was 89 dropping from a high of 112 in July 2007 and from a low of 85 in March 2007. Its amazing that currency fluctuations are so high these days and even if one do not take trading opportunities, one can just keep various currencies that offer good deposit interest yields for safe keeping especially if one plans to use those currencies one day. I took a 3 month term deposit then, which matures in March 2008 and later renewed for 1 monthly deposits 2 times. It would have been more worthwhile to have made a longer term deposit of 6 months to 1 year if one feels the exchange rate has dropped to very attractive levels. Recently when the AUD/JPY exchange rate rose to 103, I decided to just lock in on the profits when the Australian central bank mentioned that the Australian economy may be cooling down. My yield of 20% per annum is mainly due to the AUD strengthening, as my deposit interest was just 7% on the 3 month term and 5% on the 1 month term. It surely is better than putting my deposits in the Japanese banks that offer around 0.2% deposit interest rates. This tip mainly emphasizes the point of surveying financial markets to get the most out of your hard earned money else inflation will ensure your savings gets depleted faster than you would have realized.

Many daddies would frown at the risk of forex trading. I was talking to a daddy who was very excited on his new hobby of trading currencies regularly in amounts of thousands and sometimes even on margin. He was already pretty confident since he made very huge profits which now acts as his capital and he would lose nothing should he faced the risk of huge losses. Also, he has already understood how to make stop losses in trading to minimise the risk of losing too much. This can be too stressful for many daddies. I on the other hand was mainly interested to increase my experience in foreign currency and my financial literacy to ensure I got higher deposit yields for my money and also keep some AUD since I plan to make a move there. With rising prices of almost everything, your money today will buy less things in the future. Many may be confident of their good saving habits, but that amount in the bank may not increase too much if the interest rate yield in your country is low or if your currency value is depreciating. Saving and managing expenses well is not enough for a daddy to maintain financial stability these days. One needs to manage yields on your savings and invest wisely and manage risk so that your money grows, yet has little risk of losing them by knowing various alternatives and actions. Reading about financial news is necessary to know the daily happenings such as whether the central bank is doing a good job in maintaining competitive interest rates and whether your home currency would be rising or falling due to the currencies of different countries affected by their different economic growth and inflation situations. I read bloomberg news daily and its actually not too heavy with many difficult terms provided with definitions. I think one needs to be in the know of the financial markets as the coming years will be very turbulent with rising price of oil and the possibility of a new alternative energy replacing oil and turning the current global economy upside down till we find a balance again. Daddies, hold on tight and ride the waves of a financial storm. But thats what daddies do - be it fishing in rough storms or fighting the wild beasts outside the caves. The way to excel and not be harmed by the storms is by learning how to do it better everytime. Japanese have a term called kaizen - continuous improvement.