Job Discussion Forums

[Jim Bigelow]

I remember when I first came to Saudi the exchange rate was hovering around the Sr5-5.5 to the pound and it's now on Sr7.2!!
So what is the best thing to do with our riyals? Should we be changing them into dollars or poundsor sending them back to the UK, if so how?

Do you know what the bank charges are (approx) for sending money from an account here in Saudi to a UK account? A question I should and will ask my bank (Samba) of course!
It's a worry as looking at the exchange rate and the way it's been going, makes saving for the future that bit harder.

[Stephen Jones]

Saudi banks are pretty good conversion wise. Thay will charge you about 70 riyals to make the transfer. If you want to save Speed Cash will charge 20 riyals.

Be careful about charges at the British end. British banks are notorious for gouging the customer.

Incidentally the pound was running at 7.9 riyals back at the beginning of the 90s. In the last twenty years the dollar has fluctuated from just over $1 to the pound to over $2.

[Jim Bigelow]

Thank you Stephen,
What would you (and anyone else) advise doing. Is it safer to just save Riyals without changing them or do you think it's better to change them into dollars or sterling?
Really keeping me awake at night!

[veiledsentiments]

Jim

That is a hard one to answer because it is pretty much a gamble on how you 'guess' that the exchange rates will go. You might want to hedge your bets by saving in both dollars/Riyals (as they are tied in valuation) and in Sterling and perhaps also Euros?

VS

[Van Norden]

Noone knows where any currency is going. Look at the history of the Pound v the US$/Saudi Riyal:
http://au.finance.yahoo.com/m5?s=USD&t=GBP&a=1&c=3

What you can do is take a position. For example, bet on a turn around in the US$ by keeping all your savings in SRiyals or US$ over the next year. Take a contrarian view of the US$.

Of course if the US$ keeps falling you'll lose out big time, both with your savings and your emasculated salary.

Will it be worthwile staying in Saudi if the US$ doesn't recover? Regardless of which currency you save your money in you'll be earning peanuts.

[Jim Bigelow]

Thanks for the responses. Intresting consideration Van Norden!

[Cleopatra]

True, Van, nobody knows in advance what way currencies will move, and I'm no economist myself. However, "experts" are pretty much unanimous in their belief that the dollar is set to fall yet more against most major currencies, with no end in sight - at least not in the near future.

I too, wonder what impact the sinking dollar will have on TEFL recruitment in the Gulf, in particular KSA, a country where money is often the prime - if not the only - motivating factor in encouraging teachers to up stakes and come here. When I did my first stint in KSA - only a few short years ago - the Euro was worth about 3.4 SR - now it's worth 5SR! A BIG difference, one that makes a girl think. The impact might be less in places such as the UAE, where the salary - though certainly a factor - may not be the only relevant one, the way it often is in KSA.

[sledgehammer]

Having had many years experience in the forex market, I can say that the dollar will continue to drop for some time yet. It will fall particularly against Asian currencies this year and to a lesser extent the Euro. Since xmas there has been a technical rally in the dollar against most currencies including the Euro, the currency that it lost to by 10% last year.

However, when I arrive in KSA in February to take up a new position, I will definitely buy dollars because when I return to live in Mexico in a year or twos time, my savings will be worth even more because the Mexican peso has done nothing but lose value with the dollar over the last 8 years. In fact, last year the peso lost about 8% in value to the dollar (current rate 11.35peso= 1USD). So, if I take back $10,000 to Mexico next Feb, I can more or less add 5% on top of that because of more devaluation to come this year. One thing that I'm certain about, is that the peso will not strengthen against the dollar any time soon. The macro economics of the Mexican economy dictate that a softer peso is imperative if the economy is to win back a lot of the jobs lost to China over the last few years.

Looking at the SR in relation to the dollar, it's plain to see that the SR will remain pegged to the SR at 3.75 for the forseeable future. So if you are a US citizen then it doesn't really matter which currency you hold on to as long as you plan to reeturn to the U.S. If you are European types then I would advise you to buy dollars and wait for a turnaround in the the dollar which is expected to happen towards the end of 2005. Please check out www.netdania.com for current forex rates and charts to time your purchases. If anyone needs any help as when to buy a particular currency, please PM me or email me. In fact, anyone interested in learning the art of forex contact me in KSA in February.

I would also like to open forum reader's eyes to the potential of living extremely well in Mexico with money earned in KSA. I calculate that $40kUSD would allow a single person to live very well in a large town like Cuernavaca or Oaxaca for about 5 years. So with overtime and other things, an ordinary teacher could accumulate that money in about a year in KSA. Also, bank deposit rates are currently 8% for a 1 year term (small penalty if money is withdrawn earlier). So imagine, bring a wad of money in dollars or put your money in the bank and you can live even better. BTW, I know people who have been legally and illegally for up to 30 years. Oh! and as much freedom as you want without anyone placing pressure on you to conform.

Peace
Sledgehammer

[KiteBiker]

Sounds good> Which bank gives 8% these days? Praytell, which one?

[sledgehammer]

tut tut, sarcasm is really unbecoming of an English teacher!

Anyway, if you would like to check out the following

http://www.bancomer.com As you can see the Cetes rate is 8.34%


http://www.ixe.com.mx/rates/app?service=page/RatesSave for a 250K pesos investment you currently receive 7.13%

http://www.banorte.com/portal/index.jsp 7.50%

There are more if you want to see them.

I will grant you this, the more you invest the higher interest you can receive. You have to remember something here in Mexico, banks charge their clients up to 70% for personal loans and not that much lower for business loans. It's a great business for the banks here paying 8% a month to us "fools". Furthermore, the inflation rate is very stable at 4%. Things like public transport have barely increased in the last few years because it's a bit of a political hot potato. So imagine paying 2pesos to ride the subway system to any destination. The cost of a ticket 8 years ago was only 1.5pesos! Of course, some things increase with inflation no matter what such as electricity and some basic food items.

If you look at the exchange rates on the link below, you'll see that the British Pound is around 21pesos to the Pound. 7 years ago the rate was 11.25! The point I'm driving at is, if you come to Mexico or even Guatamala for that matter (even better ) you're dollars and pounds will last much longer than if you went back "home"

Hey, don't trust an annonymous poster on a forum, do some leg work for yourself. I know that I know how to invest my money which works for me even when I'm not teaching. If you want to carry around a pocket full of Riyals or whatever, good on you sport, but I know what I prefer to do

http://www.ixe.com.mx/rates/app?service=page/ExchangeRate

Sledgehammer

[KiteBiker]

OK, I get it. You meant invest it in Mexican banks. I had visions of ING Direct and HSBC dancing with your money at that rate. Aren't they the same people that had a melt-down in the mid 90's and had to have a mega bailout from the Americans?

As the song says, "let's go all the way..." and go for the Cayman Islands. I hear that they offer 3% on US$50,000 for a 180 day investment ...

[sledgehammer]

Hi again,

I don't know if you know anything about the banking scene in Mexico at this present time. You are right in saying that in 1995 there was a MELT DOWN in the financial markets here. Since then, 95% of all Mexican banks have been bought and are owned by foriegn banks.

HSBC (U.K.) bought BITAL
Scotibank (Canada) bought INVERLAT
BBV (Argentina) bought BANCOMER
SANTANDER (Spain) bought ?
CITIBANK (U.S.) bought BANAMEX

So, as you can see the world's no.1 and no.2 banks i.e. Citibank and HSBC, have a massive presence in Mexico. The days of banks being knocked over because of a change of presidency are long gone. The Mexican banking system is as strong as any.

To get good deposit rates as a foreigner you would need a FM3 work document to open a bank account and that's a piece of cake.

Sledgehammer

[KiteBiker]

OK, sounds good [no sarcasm here ...]

For me personally [ as well as for a few out there as well] other issues come into play such as family, education, language, health care, etc. If I were single and had a leg up on the language, I would consider it. And though they don't like "Gringos" there very much, I'm sure it pales in comparison to the anymosity one faces in the Gulf or even Europe, for that matter.

The matter of acceptable financial risk also is a factor - this is very personal and subjective. Would I feel safer dealing with Citibank rather than Bananamex? Probably. Would I experiment with placing money there while I am in another country and enjoy the perks of a First World environ? Possibly, but I don't think they'll allow me to do that. I'm sure transfering money in and out of Mexico is not so easy if I don't live there with an "FM3" [or whatever that was]. You would know more than I would on that score.

However, I am intrigued by what you asserted originally - that the US $ would continue to dip vis a vis the Asian currencies. Does the Tsunamie disaster enter in your calculations?

[sledgehammer]

Are you still in front of the computer

Well, the view of many leading economists, my self included , is that the U.S. has a major problem with its twin deficits spiralling out of control. The twin deficits being the Federal budget and the trade deficit. If we look at the numbers a little closer you'll see why it is a major issue, especially regarding currencies.

The federal budget currently stands at 5.7% of US GDP. The federal budget should be at around 3-3.5% of GDP. A lot of the woes in this case are attributable to the US medicare and pensions mismanagement. On top of this, the amounts needed to fight wars on 2 fronts i.e. Afghanistan and Iraq are huge. Furthermore, the US has a big appetite in spending money on fighting phantom enemies so it needs to invest equally scary amounts to developing stealth missiles, helicopters, ballpoint pens etc.

The other big deficit is the trade deficit. That basically means what are we exporting and importing and then seeing what the difference is between the 2 amounts. Well, last month the trade deficit was running at approx. $50 billion USD in favour of the rest of the world. The US has been running an average trade deficit of about $45billion a month for years. The chinese and Japanese have mammoth trade surpluses in relation to the US. There we have a possible solution.

Last year the Chinese and to a lesser extent the Japanese, refused to let their currencies be devalued. Most economists believe that the Chinese currency has to be devalued by some 15% to make the trade gap shrink between the US. But the Chinese Yuan is pegged (a bit like the SAR) against the US$ at 8. The Japanese Yen currently stands at arounf 104yen to $1USD. Again, many economists are safely predicting that the Yen will probable have to go down to about 95yen to a dollar. I think it could be lower than that, maybe near 90. However, the Japanese don't believe in floating their currency at the true rate because they've spent the last 10 years going in and out of recessions. Their economy is heavily dependent on exporting, hence the need to keep the Yen WEAK i.e. over 100yen. So they constantly intervene in the market buying dollars and selling Yen to weaken the Yen.

Anyway, to cut a long story short, last year the European currencies the Pound, The Euro, The Swiss Franc all became unrealistically strong because the burden of devaluing the dollar was not shared evenly with the Asian economies i.e. Yuan, Yen, Baht etc. Instead the Europeans had to carry the burden along with the Aussie$, NZ$, Mexican peso etc.

The dollar has to become weaker so that the Americans can balance their books. There is not much scope left in shorting the European currencies more, so the Asian currencies will feel the full force of devaluation this year.

What I've done is given you a very simple overview of the problem. The reality is far more complex but this forum is not for the discussion of the forex market so I'll stop here.

[scot47]

Cash in a suitcase under my bed.