Foreign exchange slide of the USD dollar is the area of focus in this current blog. Above i have put historic price chart of USD to Australian Dollar, USD to Icelandic Kroner and USD to Indian Rupee. The time period we are looking at is from Nov 2002 to now (Dec start 2007). Of the three currencies the Indian rupee has appreciated the least... here are the percentage changes.
Over the 5 years:
Australian Dollar: 37% appreciation
Icelandic Kroner: 29% appreciation
Indian Rupee: 18% appreciation
over the last 18 months: appreciation
| Aus | ice | Ind |
| 14% | 18% | 12% |
Digressing:
On Everbank.com you could buy Icelandic 3 month CD's that give you as much as 12%+ interest rate. (you bear the exchange rate risk.... if dollar continues to weaken you gain more than the interest rate stated, else you get less than that). As a stautory warning, i should say you should take only the amount of risk you are comfortable taking.
Let us check if this risk is worth taking.
If i get a 12% CD at current exchange rate of 1 USD for 61.3105 Kronas, the risk that i would get a return equivalent to the 5.5% US CD rate (i think its really 5.5%), is only if the Krona depriciates to 65.0895.
That means an upmove of 3.7790 in 3 months.
Checking the historic movement in USD - Icelandic Krona
| Average 3 month change: | -1.00794 |
| Max Upmove Change in 3 months with 6 yr. history : | 17.981 |
| Max Downmove Change in 3 mo. with 6 yr history : | -11.316 |
| Last 1 yr Max Upmove in 3 mo. : | 6.5027 |
| Last 1 yr Max Downmove in 3 mo. : | -8.4302 |
So my recommendation is, Icelandic krona is too volatile for this play. But we could still analyse on what factors affect Icelandic krona, but thats an whole different analysis... but until that is done i wouldnt do this above mentioned play.
Maybe a similar analysis on New Zeland Dollar and South African Rand might give us better trading oppurtunities.
