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Should I Buy Or Sell Kiwi Dollars?

Contributor:
Mary Holm
Mary Holm

Question:

I have a HSBC Hong Kong bank account as I have worked overseas for a number of years. I am now back living in New Zealand but still have around $50,000 in this account.

Some weeks ago when the New Zealand dollar against the US dollar was around 51c, I decided to transfer NZ$20,000 to my Hong Kong bank account. Many people were speculating that the New Zealand dollar would drop to 45c or even 40c against the American. Knowing the Hong Kong dollar is pegged against the American dollar, I figured I was on a winner.

The dollar dropped to 49c and I thought it was on its way down. As we all know, it went up and hasn't stopped going up yet. Some are now predicting it will go to 70c against the American dollar.

Would you suggest I withdraw my money from Hong Kong now? Do you think it will actually drop later in the year?

Answer:

Mary Holm: I don't know. And I don't think anyone else does - clearly including the "many people" you unfortunately listened to.

Of all the financial forecasts - on interest rates or the prices of shares, bonds, currency rates or even classic cars - perhaps the toughest to predict are foreign exchange rates.

A prominent banker once told me he hasn't a clue what will happen to the NZ dollar, but business customers put huge pressure on him to make predictions so they can say, when things go wrong, "I just followed what the bank told me". He does his best, but often it's incorrect.

So what should you do now? I suggest you leave the casino while you've lost only your shirt. Forget about trying to gain from currency movements and think about where you expect to spend your money.

If it's in New Zealand, plan to gradually move the money here - regardless of the foreign exchange rate. You might, for instance, move a quarter now, a quarter in three months, a quarter in six months and a quarter in nine months.

Stick to your schedule, and you'll end up moving at least part of the money at a relatively good time.

Note, though, that if you expect to spend some of the money in Hong Kong or the US, or on imports from those countries, you might be better off leaving that money in Hong Kong. That way, it won't be affected by currency movements either.

 

Mary Holm is the author of bestselling books on KiwiSaver and personal finance. She is also a highly praised seminar presenter. Her written advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following that advice.     

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