My parents are all worked up about the falling US Dollar vs. the Chinese Yuan, so they wanted to put some of their money into an account in China via some of their friends. This seemed like a terrible idea to me, so I was hoping someone here had experience doing it a smarter way... does anyone know if there's a way for them to put their saving into an American bank, but have that savings be based in the Yuan? This way, they'll be hedged against future dollar movements (at least they think so).

Thanks

Edit... updated title so that others can find this thread easier.

pETerCOolZ said:My parents are all worked up about the falling US Dollar vs. the Chinese Yuan, so they wanted to put some of their money into an account in China via some of their friends. This seemed like a terrible idea to me, so I was hoping someone here had experience doing it a smarter way... does anyone know if there's a way for them to put their saving into an American bank, but have that savings be based in the Yuan? This way, they'll be hedged against future dollar movements (at least they think so).

Thanks

Try everbank.com. They have FDIC-insured Chinese RMB deposit account which pays 0% interest rate. You can convert US dollars into RMB, they charge 0.75% of the spot rate. For example, if the spot exchange rate is 7, then USD 100 will turn into RMB 100*7*(1-0.75%)=694.75. If you exchange back to USD, then you will get 694.75/7*(1-0.75%)=USD 98.505625. Overall, you lose approximately 1.5% round-trip.

If you want to "invest" in foreign currency, you can buy the currency shares etfs, e.g., FXE, FXY, FXC, FXA.

No chinese yuan yet, but between all the other choices, you should be able to find your medicine.

The currency shares ETFs work like a savings account. YOu get dividends equal to the interest on the short end of the yield curve on the appropriate currency, more or less.

If you put money in Paypal, and later change your default currency to something else than USD (not sure if Chinese Yuan is supported), they just roll over entire sum to a foreign currency. EUR for the win!

Everbank is a good deal only if you plan to stay in Yuan for a few years.
You can also buy a Yuan ETN symbol: CNY
It's safe as long as Morgan Stanley doesn't go under.

Much less hassle if you already have a brokerage account.

Also, Wisdom Tree may soon be introducing a Yuan Money Market ETF

There is a decent list of currency based/linked ETFs here. Two it does not include are CNY (china) and INR (India). Those two are ETNs.

Option one is the way to go! Then you can put your savings into a CD 4.1% for one year right now. Problem is you can only legally convert $50,000 per person. Still - 4.1% plus say another 6% in RMB gain on the dollar over the next year = $5,000 profit. That'll pay for your vacation plus some. Oh yeah, one last problem, getting it back into dollars will have to be done with the help of a Chinese national or on the black market...

Another thing to consider is that the RMB has already appreciated a lot and is going to start slowing down. People getting in now are already a bit late to the game.

Beatnitup said:why is converting your money on paypal a bad way to do it?Well for starters, Paypal does not transact in Chinese RMB. (It does offer HK$ transactions.) But more importantly, Paypal offers a type of retail currency exchange. While there rates are fairly decent, as retail transactions go, you can do better than a 2.5% haircut each way on your transaction. Paypal is not, nor does it hold itself out to be, a method of "investing" in foreign currency or exchanging currencies for personal use.

Kanosh said:hclimb34 said:Another thing to consider is that the RMB has already appreciated a lot and is going to start slowing down. People getting in now are already a bit late to the game. The game has hardly begun. Appreciation so far has been only 16% -- since the year 2005, when the RMB was de-pegged from the dollar. There's still a lot of appreciation to be seen. Most see it is inevitable that at some point, the RMB will become fully convertible, which will likely hasten its appreciation as the real horde of investors comes in.

If one is the gambling sort (I'm not) another good trading position might be to buy Hong Kong dollars now. The HK dollar is still pegged to the US dollar -- even as it has switched places as the RMB has become more valuable than it. If the US dollar situation continues much longer it is not unreasonable to expect the HK Monetary Board would de-link HK$ from US$ and we'd see that currency appreciate significantly in a short time.

Although I agree that appreciation will continue, especially over the long term, I do think you will see some slowdown in the rate for the remainder of this year. Chinese exports are already being significantly affected by the appreciation.

Interesting idea about the HKD, might be a place to put some of my AOR money, considering the direction U.S. rates are heading. HKD interest rates aren't so hot, but a re-evaluation would be significant.

hiddendragon999 said:HKD cannot be re-pegged until RMB is freely floated. Should be obvious. Pegged to the RMB, probably not, but its peg to the dollar could be adjusted, no?