borrowing at low interest and re-investing at high interest is known as a 'carry trade' (see the following for an explanation: http://www.economonkey.com/2007/09/01/an-explanation-of-the-carry-trade/) large financial institutions and banks have been doing it for decades with trillions of dollars. There is substantial currency risk involved. You can access it as a retail investor via standard currency trading platforms but the risks involved are significant.
yes especially if you bank in Iceland Can't respond in any meaningful fashion as I haven't seen a chart on the currency pair or followed it closely enough, so you may well be correct about the upside etc. that said, I didn't expect to see the XJO at sub 4000 either and that's happened, so my own personal risk profile at present is to sit back as there really is no knowing just how far this will drop just yet…perhaps in another month or two it'll become clearer but right now… wow..
Living in both countries I follow the exchange between AUD & YEN very carefully. Especially as I receive incomes in both currencies. The exchange rate at one time was 58 and for 500000 yen I sent to OZ I received around $8500. Once the currency rose to around 75 I stopped and just kept the incomes in both countries separate. The AUD went to 105 and I transferred 50K over as I believed at the time the AUD was ready to go down in a big way. Just transferred that money back and the rate I got was 65. Nice little 30K profit in a few months.
Although the idea of borrowing money at low interest is appealing I have never done due to sudden currency fluctuations. Also you might find that being a foreigner you may be borrowing at 2 or 3% and not under 1%. The same situation can be applied to borrowing Yen through NAB etc to buy OZ properties but it is better if your income is also in Yen.
Hi, once did profit from USD/YEN. Hairy ride though during the sept 11 days. Everyday passed put USD10 into the interest column & at the end of 3 months I collected about 1500USD & the exchange moved back into my favour when the mess cleared up. Made about $30K after accounting for errors with AUD
Then I went on to buy AUD & hit the jackpot! But before anyone rush out to buy anything, I'll tell you that there was some kind of mad hatter reasoning why I did such an idiotic thing. I would have to eventually buy $500K AUD to pay for my property so I thought I might as well buy when it was 50 cents against USD.
I wouldn't touch USD with a barge pole today but AUD/Yen. Now that might be interesting. Anyone knows how toxic AUD might be?