# Uptrending $US cash - best strategy?



## cestlavie (14 September 2014)

hi all,
new here. already like this place after browsing for a few minutes 

a quick question to ask but not 100% if this is the right sub-forum to post. was about to post it in "forex" but realized my question has nothing to do with forex trading so decided to just post it here. If moderators think it's the wrong place to ask, pls feel free to move it.

ok here's the question and any constructive opinions would be appreciated. I've got some US$ cash(6 figures) at hand and am not sure what would be the best option for me, reason being the trend for the next a few years is US$ will go up and AU$ down. I've thought about my options but not sure which one would suit me best (and honestly, not sure if there're other options I've failed to take into consideration):

1) hold US$ as is and do nothing
Pro: it appreciates value against AU$
Con: no interest earnings and I can't use it in AU

2) convert it to AU$ and put it in my mortgage offset account
Pro: it saves me money in interest payment
Con: I'll miss out on the US$/AUD up trend

3) use the US$ as collateral and borrow some AU$
Pro: I can save money in interest payment and won't miss out on the US$/AUD up trend
Con: not sure where to go and who to see

I'm only assuming here that option 3 exists. I've heard that this practice is commonly used by companies involved in international trading to hedge risks caused by currency fluctuation. 

Any help would be much appreciated!
Ken


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## tech/a (14 September 2014)

(4) 
Take it all off your mortgage.


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## cestlavie (14 September 2014)

thanks but could you elaborate more? why this would be the best move for me? pros and cons compared with the other 3 options? You've posted a lot on this forum and I'm sure you have tremendous knowledge in topics like this...thanks a lot in advance!!



tech/a said:


> (4)
> Take it all off your mortgage.


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## tech/a (14 September 2014)

It's an option you hadn't considered.
Only you know if it suits you.


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## cestlavie (14 September 2014)

thanks, to work out if it's the best option or not, I guess I need to work out the below first...

Let's say I bought a property for $500k with $100K down payment and $400k mortgage. If I got $50k cash, does it make any difference if I deposit it into the offset account or reduce the mortgage from $400k to $350k(assuming I pay interest only)? If I still pay the same interest every month, I guess I'll be better off depositing it into the offset account so that in case I need money urgently I can access it right away - am I on the right track?:



tech/a said:


> It's an option you hadn't considered.
> Only you know if it suits you.


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## burglar (14 September 2014)

tech/a said:


> It's an option you hadn't considered.
> Only you know if it suits you.




It suited most of me, ...

I have a little corner of my mind which feeds on adrenaline!
It's getting some exercise now,
since the mortgage has been wrenched from my income.


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## tech/a (14 September 2014)

If the future value of the AUD erodes 25% as a hypothetical figure
Using the USD to pay out the mortgage locks in the full value of today.
Simply create a line of credit if you want extra cash at the new depreciated rate.
Can't have both.
You either use it , keep it , or lose it.
Your choice.


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## CanOz (14 September 2014)

Interesting question, we're also looking at moving some CNY to AUD and since the CNY is semi-pegged the DX is relevant. I see a consolidation forming at the present price and a good chance of a test of the range top. We would look to transfer some of our funds then...after that we'll wait and see if we look like continuing or reversing...

Just my thoughts on the direction, not what to do with it....although if it was me I'd slap it in the offset.


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## pinkboy (14 September 2014)

cestlavie said:


> thanks, to work out if it's the best option or not, I guess I need to work out the below first...
> 
> Let's say I bought a property for $500k with $100K down payment and $400k mortgage. If I got $50k cash, does it make any difference if I deposit it into the offset account or reduce the mortgage from $400k to $350k(assuming I pay interest only)? If I still pay the same interest every month, I guess I'll be better off depositing it into the offset account so that in case I need money urgently I can access it right away - am I on the right track?:




That is the general 'correct' advantage of an offset account.  The cash in your offset does exactly the same thing (offsets interest) as does depositing the cash into the loan, but has the flexibility to be 'at call' immediatly.


pinkboy


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## burglar (14 September 2014)

pinkboy said:


> That is the general 'correct' advantage of an offset account.  The cash in your offset does exactly the same thing (offsets interest) as does depositing the cash into the loan, but has the flexibility to be 'at call' immediatly.
> 
> 
> pinkboy




There is *no flexibility* like having paid off the mortgage!


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## tech/a (14 September 2014)

burglar said:


> There is *no flexibility* like having paid off the mortgage!




Yeh but you'd pay it off after the AUD drops appreciably.
Getting more bang for your buck.


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## Bill M (14 September 2014)

I hold some USD too and I am going to hold on to my parcel a bit longer as I believe the AUD will sink lower. If it hits .89c I think I will sell my parcel and I will make a profit.

I will then place it in my UBank account and get 4.17% interest on my cash.

As you have probably already made some profits with your USD perhaps it could be time to cash in some and put it in your offset account. When I am undecided I usually do the 50/50 rule, good luck with whatever you chose to do.


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## cestlavie (14 September 2014)

The Chinese government has printed way too much money over the years and I'm sure one day their RMB will depreciate A LOT...not next week, next month or even next year but won't be too long from now...that's my prediction 



CanOz said:


> Interesting question, we're also looking at moving some CNY to AUD and since the CNY is semi-pegged the DX is relevant. I see a consolidation forming at the present price and a good chance of a test of the range top. We would look to transfer some of our funds then...after that we'll wait and see if we look like continuing or reversing...
> 
> Just my thoughts on the direction, not what to do with it....although if it was me I'd slap it in the offset.


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## cestlavie (14 September 2014)

I think the longer-term target would be .80c for AUD as a MINIMUM...US$ will be VERY strong in the next several years which will shock a lot of people as all they know is US government has printed too much money and the only way for US$ to go is down...all the way to hell...and they'll be shocked at what actually happens. and that's one of the forms that wealth changes hands lol 



Bill M said:


> I hold some USD too and I am going to hold on to my parcel a bit longer as I believe the AUD will sink lower. If it hits .89c I think I will sell my parcel and I will make a profit.
> 
> I will then place it in my UBank account and get 4.17% interest on my cash.
> 
> As you have probably already made some profits with your USD perhaps it could be time to cash in some and put it in your offset account. When I am undecided I usually do the 50/50 rule, good luck with whatever you chose to do.


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## SuperGlue (14 September 2014)

Check out Citibank Multi Currency Account.

http://www.citibank.com.au/aus/investments/multi_currency_account.htm


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## Smurf1976 (14 September 2014)

Something to bear in mind is that whilst you may expect the USD rise relative to AUD, noting is ever guaranteed in the market.

Always trade with the understanding that what you consider "certain" might not actually happen. Nothing is ever guaranteed - ever!

As for how to go about it, I haven't looked into this one personally but there's an ETF that aims to track movement in the USD relative to AUD. It has a convenient ASX code "USD" and can be bought and sold the same way as shares. That's one way, a fairly easy one, to do it.


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## CanOz (15 September 2014)

cestlavie said:


> The Chinese government has printed way too much money over the years and I'm sure one day their RMB will depreciate A LOT...not next week, next month or even next year but won't be too long from now...that's my prediction




That might be your prediction but at the moment that's not happening...we obviously want the same thing that you want, the best price we can get.

You'll never be able to nail it completely but with some experience and good technical skills you may be able to get a good average price as opposed to buying or selling at a top or bottom. Thanks for your macro view though...


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## Wysiwyg (15 September 2014)

Smurf1976 said:


> As for how to go about it, I haven't looked into this one personally but there's an ETF that aims to track movement in the USD relative to AUD. It has a convenient ASX code "USD" and can be bought and sold the same way as shares. That's one way, a fairly easy one, to do it.



Just adding the Betashares US Dollar ETF Units has broken upward with volume in the last few days after  several months of consolidation. Agree that nothing is certain and that is what makes the markets harder to participate in.


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## Wysiwyg (15 September 2014)

Smurf1976 said:


> As for how to go about it, I haven't looked into this one personally but there's *an ETF that aims to track movement in the USD relative to AUD*. It has a convenient ASX code "*USD*" and can be bought and sold the same way as shares. That's one way, a fairly easy one, to do it.



They don't pay a distribution while the unit price change for this calender year from highest price to lowest price is about 9.25%.


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## minwa (15 September 2014)

cestlavie said:


> I think the longer-term target would be .80c for AUD as a MINIMUM...US$ will be VERY strong in the next several years which will shock a lot of people as all they know is US government has printed too much money and the only way for US$ to go is down...all the way to hell...and they'll be shocked at what actually happens. and that's one of the forms that wealth changes hands lol




If you have that strong of a conviction maybe spend LESS time/effort on saving a few % deciding on mortgage/interest and MORE time/effort on trading that trend with leverage - and make hundreds of % ?

Have you correctly forecasted a major move of a currency a few years out before ? If you have - did you manage your holdings to profit a bit or did you trade the move for a windfall ? If you havn't - what makes you so sure of the oncoming appreciation of the USD ?


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## Bill M (15 September 2014)

cestlavie said:


> I think the longer-term target would be *.80c for AUD as a MINIMUM*...US$ will be VERY strong in the next several years which will shock a lot of people as all they know is US government has printed too much money and the only way for US$ to go is down...all the way to hell...and they'll be shocked at what actually happens. and that's one of the forms that wealth changes hands lol




If you know all this "as a minimum" (as you say) then why are you even asking this question?


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## pinkboy (15 September 2014)

burglar said:


> There is *no flexibility* like having paid off the mortgage!




Not entirely correct, and less flexible if you have your PPOR mortgage 'effectively' paid off through the use of an offset account.  

The offset account on your PPOR gives you the benefit of cash 'at call' should you ever need it (such as operation, holiday, new car etc), or the greatest advantage is the 'portability' of the cash should you ever move PPOR.

If you buy a new PPOR and have the loan fully paid off on your old one, then you have to re-borrow money which is effectively a new non-deductable debt.  The double whammy is if you rent out your old PPOR, there is no deductable debt to offset the income, so the full income will be added to your income, which may push you up a tax bracket.

Had you had your loan fully offset on your PPOR, you could take that cash straight out off the offset to purchase your new PPOR (in a new IO loan with offset), and when you rent out your old PPOR, there is full deductable debt on the place, which offsets the income (plus depreciation, outgoings etc).  Otherwise, you would have to sell your old PPOR outright and use the sale proceeds to your new PPOR.  (And there could be CGT if you purchase new PPOR and rent out old PPOR prior to sale, but we wont get into that).


pinkboy


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## cestlavie (15 September 2014)

I just realised I omitted something which may have caused some kind of misunderstanding...

I'm not a FX trader and my US$ cash isn't from FX trading profits. May consider start to learn how to trade FX. and that's why when I asked my questions I did mention that it has nothing to do with FX  trading...





Bill M said:


> If you know all this "as a minimum" (as you say) then why are you even asking this question?


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