From: "John Smith" 
Newsgroups: uk.finance
Subject: Re: Best way to invest in US dollars?
Date: Mon, 12 Jan 2004 21:58:41 -0000

OK, I was thinking about this last week when reading about a lottery winner.
If someone changed 1 million UK Sterling in 1 million US dollars now, put
that in a US bank earning the 1% interest they would not make much money.
However, if they waited 12 - 14 months, US election comes and go, US economy
rebounds and there is no longer a need for a weak dollar and the
dollar/pound returns to 'normal', couldn't that person transfer all their
dollars back into pounds and make a serious profit?

Would such a person then be deemed as someone making money from currency
transfers? What kind of tax would be on that?

Just curious,


J.

"Jane Tweedynn"  wrote in message
news:bts34j$ahsqk$1@ID-188274.news.uni-berlin.de...
>
> "Jeremy"  wrote in message
> news:btqn44$hkb$1@titan.btinternet.com...
> > Hello,
> >
> > I'm thinking about buying a grand's worth of US dollars for investment
> > purposes. What's the cheapest/easiest way to do this? What about buying
> them
> > as travellers cheques and sitting on them for the next few years? Or can
i
> > open a dollar account with a UK bank?
> >
>
> Since none of our resident math geniuses has helped i will offer my simple
> maths.
>
> The current price of a pound to a dollar is about 1.84.  Having just
looked
> at the Thomson website commission free purchase and sell of US dollars is
> buy: 1.7488 and sell: 1.9612.  A big spread.
>
> So if you bought £1000 of dollars you would have £1748 dollars.  If you
were
> to immediately sell them back to pounds at 1.9612 you would get £891.  A
> loss of £109.
>
> To break even not calculating inflation or the £37.5 interest gained on an
> ISA paying 3.75% per annum and using the current spread of 12.1455%, the
> exchange rate would have to drop from 1.84 to 1.558.  With the spread the
> sell of currency would be 1.747 which would equal about £1000.
>
> If the dollar dropped to its level of about 2 years ago at 1.4, with the
> spread your profit would be about £113, about the same as your cash being
> invested for three years in an ISA with nil risk.  If you intend to spend
> the dollars your profit would be £249, although this would not be real
> profit as this should be discounted back to include unknown inflation and
> compared to other investments.
>
> As for dollar accounts the banks aren't going to be interested in a measly
> £1000 and with US interest rates at 1% don't expect any interest on your
> money.
>
> You could consider spread betting, but you have to understand the markets
> and be ready to act.
>
> Anyhow, the dollar is going to fall further, its what the FED wants.  Why
> you so sure its peaked.
>
>