Duffster

Howdy All

Before I go digging into FX reports, has anyone [recently ] looked into which currency would be best to be paid in?

Being paid in USD today provides a small yield compared SAR when converting to GBP - which would be done at least quarterly with savings.

Thanks
Mike

The Dean

I'm not sure I follow you (I've only been working in the currency markets for 30 years).............

The USD/SAR rate is fixed at 3.75, so what difference does it make? You mention yield - I assume you get a slightly higher interest rate for a SAR deposit account than USD? It can't be much surely, otherwise you'd be in a guaranteed risk-free profit arbitrage situation (borrow USD at lower rate, convert to SAR at 3.75, invest SAR at higher rate, convert back to USD at 3.75 at maturity)?

And can you actually maintain a USD-denominated account in Saudi Arabia?

Your basic question I suspect is also about the likely future path for the GBP exchange rate.......... it's bounced a bit in the last day or two but my view is that it's on a long-term decline.

Butterich

Just double checked in Bloomberg:

The Saudi Riyal Interbank Average Offered Rate 1 Month is

0,35625%

The BBA LIBOR USD 1 Month is

0,26125%

Another example for 12M:

The Saudi Riyal Interbank Average Offered Rate 12 Month is

1,04875%

The BBA LIBOR USD 12 Month is

0,78375%


This isn't marginal but I don't think it is likely to profit from that even if - as a single individual - there would be access to that yield differential. And of course it isn't absolutely riskfree anyway because the money would be in KSA instead of UK and you would have to bear the risk that the SAR/USD peg might be lifted (even though thats probably unlikely)

Currency fluctuations as you deal with them e.g. with the GBP as your "home currency" is rather subjective. I am in the same boat as I still think in EUR as this is my "home currency" but when you live in Saudi at least the expenses are in USD due to the peg. What slightly annoys me though is that the potential savings I plan to work up could be worth more or less due to EUR/USD. EUR/USD yesterday was up like 2% in a single day.

Duffster

Aha! Didn't realise the SAR was pegged to dollar

So far package discussions have been referenced in dollars and turns out this was more for my convenience! Contract will be local and paid in Riyal (which I'm told is normal practice.)

My concern is exactly what #Butterich describes - having my savings plan negatively impacted by FX movements in the next 2 years. Lot's of "what if" scenarios, but it can of course also change in my favour.

Thanks
Mike

Butterich

What you could do is try to hedge the currency via currency future with some discount broker.

Duffster

Thanks, once move here is 100% certain will look into it.