I Miss My Aussies

By now even people who do not usually read the business pages or follow financial news are vaguely aware that the dollar has been steadily weakening against almost every other currency in the civilized world. Scarcely a day passes that some pundit or analyst does not prophesize dire consequences if the country does not get its fiscal house in order.

Since 2001 the dollar has weakened 33% against the euro and 20% against the Japanese yen not to mention similar declines against the Canadian dollar, the Australian dollar or the British pound sterling and others. But put another way, you could have earned 33% profit if you had bought euros. That is, if you could have gotten your hands on euros.

But banks in this country stubbornly resist offering retail customers foreign currency accounts. Of course, the big banks do have international departments to provide the millions in Japanese yen or whatever that exporters need to do business in the Pacific Rim or to send remittances back to El Salvador. But go down to your local banks branch and ask to open an account in, say, Swiss francs, and you will get a blank look.

This is in contrast to other countries where savers can choose to park their money in any one of a dozen different currencies. When I lived in Hong Kong I put much of my savings into an Australian dollar account. I don’t claim to have been smart enough to foresee the Aussie appreciating 24% in six months. I was simply looking for savings account that offered an interest rate with a numeral on the left side of the decimal point.

Why is it that you can walk into any bank in Hong Kong – and I mean any bank, not just the downtown giants, banks in ordinary neighborhoods that are sandwiched between the Chinese medicine store and the birds nest soup shop – and open a savings account in euros, or yen, or Swiss francs or Canadian dollars? Why can’t we do this in the Land of the Free?

“Only in America do we think only in dollars. But people in most of the rest of the world have a choice of currencies,” says Chicago-based personal investment columnist Terry Savage. “Why not follow the smart money?”

If you want to profit from the fall in the dollar in this country is left basically with two choices. You can go down to Thomas Cooke and buy a big glob of foreign currency and then put it in a savings deposit box (or under your mattress). Or, you can open an account with Everbank.

Everbank of St. Louis (www.everbank.com) is an online bank and the only one I know of in the U.S. that actively seeks foreign currency deposits. These are normal, federally insured savings accounts usually offering interest rates considerably higher than U.S. dollar savings accounts (more than 6% on the South African rand, for example).

Why don’t more American banks provide this service? To some extent it is a chicken-egg situation. Trading in currencies is labor intensive, with banks having to set up special bookkeeping and back office operations to keep track of the transactions. This makes them think that chasing nickel and dime savings may not be worth the cost – especially if they don’t feel the public clamoring for them.

Moreover, there seems to be a perception that saving in foreign currencies is somehow unduly risky. Never mind that betting on a falling dollar is about as safe a bet as one can make over the next few years. Economists differ only on whether the dollar’s decline will be gradual or precipitous.

People who think nothing of putting their savings in some new dotcom startup, seem to think that currencies are for speculators. True, there are traders who make quick profits by placing big bets on small fluctuations in currency values. This is a risky business, akin to trading in commodity futures. But I’m talking of ordinary savings accounts. Investors can reduce their risks by sticking with short-term CDs and moving money out if the currencies fall.

Gretchen Steel, vice president of for foreign exchange trading at US Bank in Seattle, discourages ordinary savers from opening such accounts. “People say you can make a killing in say, yen, but to do so you have to have a lot of money.” Well, maybe. Even a 20% return on, say, Australian dollars may not set you up for life in Hawaii. But it is still a nice piece of change.