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How to capture higher global interest rates

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rajiv1

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Nov 25, 2006, 10:36:13 AM11/25/06
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Besides emerging market bond funds, what are the ways to capture higher
interest rates abroad. In London, for instance, banks are offering 6%
interest rates on savings account. And MExican Central Bank yesterday
maintained their interest rate at 7%. I am not worried about currency
exposure as I think the dollar would stablize or even decline somewhat
here.

joetaxpayer

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Nov 25, 2006, 11:13:03 AM11/25/06
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The market says otherwise.

If the one year rate in the US is 5%, and in Mexico, it were 10%, the
market is making a statement that the dollar is rising against the peso.
Looking at the currency futures contracts can confirm this. Any
anomalies in the exchange rate vs interest rate are quickly arbitraged
away for a small profit.
A currency that's rising against the dollar will naturally have a lower
interest rate for a short term instrument.

JOE
JoeTaxpayer.com

rajiv1

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Nov 26, 2006, 11:14:03 AM11/26/06
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> The market says otherwise.
>
> If the one year rate in the US is 5%, and in Mexico, it were 10%, the
> market is making a statement that the dollar is rising against the peso.
> Looking at the currency futures contracts can confirm this. Any
> anomalies in the exchange rate vs interest rate are quickly arbitraged
> away for a small profit.
> A currency that's rising against the dollar will naturally have a lower
> interest rate for a short term instrument.


What if you are taking the opposite call. Say, I am personally bearish
on the dollar and want to take a view to have some non dollar assets.
What's the best way to do it besides buying a mutial fund.

Shhhh

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Nov 26, 2006, 12:24:25 PM11/26/06
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I know your not exactly looking for mutual funds... but this would be right
up your alley... the Merk Hard Currency Fund... MERKX


Shhhh

"rajiv1" <raj...@gmail.com> wrote in message
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Dave Dodson

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Nov 26, 2006, 3:09:38 PM11/26/06
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rajiv1 wrote:
> Besides emerging market bond funds, what are the ways to capture higher
> interest rates abroad.

Fidelity New Markets Income

Dave

beli...@aol.com

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Nov 27, 2006, 9:58:34 AM11/27/06
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One can buy a futures contract on many currencies, including the
Mexican Peso, on the Chicago Mercantile Exchange. The contracts are
priced to account for interest rate differentials. To trade futures,
one needs a futures account. I have a brokerage account at
OptionsXpress that lets me hold stocks, stock options, and futures in a
single account.

I think investors, not just speculators, can use futures, but they must
understand the transactions they are entering and the risks involved.

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