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Comment by pankajdoharey | Hacker News Reader

Well nothing stops you from investing abroad, For instance Investing in Indian Bank as a depositor will get you a guaranteed 6-7% return per annum depending on the bank. Long term deposits have even higher return rates, some smaller private banks even give as high as 8-9% on deposits.

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There’s a risk that your money isn’t covered by the deposit protection schemes of either country, so if the bank goes bust you lose the lot. Even if you are covered, the amount you get back could be limited.

With that factor built in 6-9% doesn’t look so good.

Investing in Indian Bank as a depositor will get you a guaranteed 6-7% return per annum depending on the bank.

That would be free money, so it’s already priced into the exchange rate. All other things being equal if you transferred US dollars into an Indian account, left them a year, then transferred back then you would be no better off than if you had left the money onshore, but you would be down the transaction fees.

People who make money in FX trading do so by betting that interest rates will move in their favour, and interest rates influence exchange rates (or more accurately expectations about future interest rates set current exchange rates)

Holds true only if you convert your currency to INR. The dollar denominated deposits (FCNR) have far lower yield around 3.4% still better than what the US banks offer.

https://www.icicibank.com/nri-banking/RHStemp/rates.page

But I think you need to hold an Indian passport to open these deposits. I am not sure though.

Actually even i am not sure about that. There should be some route though, Foreign Institutional Investors do invest so there should be some legal route to circumvent this.

> Well nothing stops you from investing abroad

Currency fluctuations.

That is not stopping you at all.

https://en.wikipedia.org/wiki/Interest_rate_parity

"Covered interest rate parity (CIRP) is found to hold when there is open capital mobility and limited capital controls, and this finding is confirmed for all currencies freely traded in the present day."

Well technically it's not but realistically it is.

Hedging against currency movements is fairly trivial and doesn't cost much, I've gone down this route in Vietnam after getting annoyed at being forced into investments by low interest rates ( putting savings in most western banks is going backwards).

1 year deposit pays over 7%, the currency moved in my favor but still happy taking out the hedge.

Getting a far better return than the riskier corporate bonds I hold locally.

> Hedging against currency movements is fairly trivial and doesn't cost much

The cost is essentially the (risk-free) interest rate differential that you were trying to capture in the first place.

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