Free money?

[Moscow Mule]

Why?

I cannot see why this is better than borrowing at a very low rate and investing at a very high rate on money I don't even have?

Your scenario:
Exchange rate variance will **** you in the ass. With a flagpole. Sideways.

My scenario:
You can take advantage of the interest rates and predict the direct of ISK/JPY exchange rates and bet on them.

ISK/JPY has moved 2.5% in the last week.

[King Cnvt]

Your scenario:
Exchange rate variance will **** you in the ass. With a flagpole. Sideways.

My scenario:
You can take advantage of the interest rates and predict the direct of ISK/JPY exchange rates and bet on them.

ISK/JPY has moved 2.5% in the last week.

I don't think so.

http://www.forbes.com/markets/2007/0...markets04.html

Am I right or am I right?

[Moscow Mule]

I don't think so.

http://www.forbes.com/markets/2007/0...markets04.html

Am I right or am I right?

Ok, since you've done some reading, I'll bite.

Have a read of this fella .

The most you can make (assuming static exchange rates) is 12% - 14% on your ISK, minus 2% cost of funds on your JPY.

The risk you take is that almost overnight, exchange rates move to such an extent that the principal you have stashed in Iceland is not enough to cover the money you owe in Japan.

I wouldn't want to take that risk, but hey, it's your money.

[ASB]

http://www.exchange-rates.org/history/JPY/ISK/T

29/12/06 1 ISK = 1.68506 JPY
26/06/07 1 ISK = 1.96004 JPY

Seems to me borrowing JPY to buy ISK would have worked quite well over this 6 month period.

1,000,000 jpy yielded 593,450. This converts back yesterday to 1,163,187.

[andy]

http://www.exchange-rates.org/history/JPY/ISK/T

29/12/06 1 ISK = 1.68506 JPY
26/06/07 1 ISK = 1.96004 JPY

Seems to me borrowing JPY to buy ISK would have worked quite well over this 6 month period.

1,000,000 jpy yielded 593,450. This converts back yesterday to 1,163,187.

and it may go on for another 6 months before all goes tits up

[meridian]

Those are interbank rates.

Try again with cash rates, the spread will eat about 8% of the gain, and will be worse if you convert to GBP first.

[thunderlizard]

well that's 16% in 6 months, on a rather risky position. seems fair.

Just think, this is the kind of ecomonics that whaling ship and harpoon manufacturers must hedge against every day.

[Moscow Mule]

well that's 16% in 6 months, on a rather risky position. seems fair.

With somebody else's money? Maybe. With mine? No way, I'm far to risk adverse to risk 100% of my capital on a 16% gain, (edit: or just 8% at retail rates).

Just think, this is the kind of ecomonics that whaling ship and harpoon manufacturers must hedge against every day.

[Moscow Mule]

and it may go on for another 6 months before all goes tits up

And it may happen tomorrow. IANAIFA but I would counsel against it.

[ASB]

Those are interbank rates.

Try again with cash rates, the spread will eat about 8% of the gain, and will be worse if you convert to GBP first.

Well yes, but I would imagine I would do much better than cash rates. There would be no need for conversion to GBP first.

It does seems as though historically the OP proposition would have worked quite well over the previous 6 month.