I’ve been saving money in rand all year, because of the high interest rate and appreciation. It has been tracking the aussie dollar, but recently has appreciated 15%. Unfortunately, that appreciation cannot be realized at ICBC. I was hoping to find a bank that carried Rand in currency so that I could cash out or which offered a decent rand to aussie exchange…
Does anyone know if retail investors can enter into a small scale forward position? I hear there are some online brokers that specialize in currency investing with competitive prices, but I’m not so sure about whether the forward market is available to retail investors.
Reason is that I’m not sure you can earn additional interest by converting to another currency. That’s because if you were able to enter into some sort of forward position, then the forward price would reflect the interest rate differential, due to something called “interest rate parity”, in which competitive markets force the differential between currency forward and spot market price to reflect the interest rate difference between two countries.
If forward positions aren’t available to retail investors, then I suppose you don’t have a choice but to convert all your currency to earn that interest rate. Keep in mind there are transaction costs when you buy and sell currencies, so you have to be sure the anticipated appreciation is higher than the buy and sell transaction costs you incur (through the bid-ask spreads) and is high enough to justify the risk you are assuming.
I bought some Rands at the Hua Nan Bank a few years ago, but I think that most big banks (like HSBC) can order Rands for you, as long as you give them enough notice.
