How to invest in a currency increasing in value relative to another?
"What you're looking for are either FX Forwards or FX Futures.   These products are traded differently but they are basically the same thing -- agreements to deliver currency at a defined exchange rate at a future time.   Almost every large venue or bank will transact forwards, when the counterparty (you or your broker) has sufficient trust and credit for the settlement risk, but the typical duration is less than a year though some will do a single-digit multi-year forward on a custom basis.  Then again, all forwards are considered custom contracts.  You'll also need to know that forwards are done on currency pairs, so you'll need to pick the currency to pair your NOK against.  Most likely you'll want EUR/NOK simply for the larger liquidity of that pair over other possible pairs. A quote on a forward will usually just be known by the standard currency pair ticker with a settlement date different from spot.  E.g. ""EUR/NOK 12M"" for the 12 month settlement. Futures, on the other hand, are exchange traded and more standardized.  The vast majority through the CME (Chicago Mercantile Exchange).  Your broker will need access to one of these exchanges and you simply need to ""qualify"" for futures trading (process depends on your broker).  Futures generally have highest liquidity for the next ""IMM"" expiration (quarterly expiration on well known standard dates), but I believe they're defined for more years out than forwards.   At one FX desk I've knowledge of, they had 6 years worth of quarterly expirations in their system at any one time.  Futures are generally known by a ticker composed of a ""globex"" or ""cme"" code for the currency concatenated with another code representing the expiration.  For example, ""NOKH6"" is 'NOK' for Norwegian Krone, 'H' for March, and '6' for the nearest future date's year that ends in '6' (i.e. 2016).   Note that you'll be legally liable to deliver the contracted size of Krone if you hold through expiration!  So the common trade is to hold the future, and net out just before expiration when the price more accurately reflects the current spot market." On international stock exchanges, they trade Puts and Calls, typically also for currencies. If for example 1 NOK is worth 1 $ now, and you buy Calls for 10000 NOK at 1.05 $ each, and in a year the NOK is worth 1.20 $ (which is what you predict), you can execute the Call, meaning 'buying' the 10000 NOK for the contracted 1.05 $ and selling them for the market price of 1.20 $, netting you 12000 - 10500 = 1500 $. Converting those back to NOK would give you 1250 NOK. Considering that those Calls might cost you maybe 300 NOK, you made 950 NOK. Note that if your prediction is common knowledge, Calls will be appropriately priced (=expensive), and there is little to make on them. And note also that if you were wrong, your Calls are worth less than toilet paper, so you lost the complete 300 NOK you paid for them. [all numbers are completely made up, for illustration purposes] You can make the whole thing easier if you define the raise of the NOK against a specific currency, for example $ or EUR. If you can, you can instead buy Puts for that currency, and you save yourself converting the money twice. Forex trading contracts are generally fairly short dated as you mention.  Months to weeks.  Professional forex traders often extend the length of their bet by rolling monthly or quarterly contracts.  Closing a contract out a few days before it would expire and reopening a new contract for the next quarter/month.  This process can be rather expensive and time consuming for a retail investor however. A more practical (but also not great) method would be to look into currency ETFs.  The ETFs generally do the above process for you and are significantly more convenient.  However, depending on the broker these may not be available and when available can be illiquid and/or expensive even in major currency pairs.  It's worth a bunch of research before you buy. Note, in both cases you are in a practical sense doubling your NOK exposure as your home currency is NOK as well.  This may be riskier than many people would care to be with their retirement money.  An adverse move would, at the same time you would lose money, make it much to buy foreign goods, which frankly is most goods in a small open country like Norway. The most simple solution would be to overweight local NOK stocks or if you believe stocks are overvalued as you mention NOK denominated bonds.  With this you keep your NOK exposure (a currency you believe will appreciate) without doubling it as well as add expected returns above inflation from the stock growth/dividends or bond real interest rates. The increase of currency value in relation to another is a critical determinant of the economic health. It plays an important part in the level of trade and affects the world’s free market economy. But, they also effect on smaller scale as they create an impact on the portfolio of investors. So, it is suggested that the investors should make their trades wisely keeping in mind the value of other currencies that might your trade. Also, you should check the news daily to get regular updates and be well-informed of any changes happening in the market
International exchange rates are arbitraged. If I exchange A for B for C and then back to A again, I'll end up with the same amount ex trade fees. Assume this isn't the case. Clearly if I'd gain, someone else loses and I'd make millions by rapidly exchanging. Now assume that I'd lose money on that route. That must be because the reverse route, A->C->B->A gains money. (Again, assuming no fees) So in this case you'd just look at fees. (And as Ganesh points out, that may include future fees) "Like Jeremy T said above, silver is a value store and is to be used as a hedge against sovereign currency revaluations.  Since every single currency in the world right now is a free-floating fiat currency, you need silver (or some other firm, easily store-able, protect-able, transportable asset class; e.g. gold, platinum, ... whatever...) in order to protect yourself against government currency devaluations, since the metal will hold its value regardless of the valuation of the currency which you are denominating it in (Euro, in your case).  Since the ECB has been hesitant to ""print"" large amounts of currency (which causes other problems unrelated to precious metals), the necessity of hedging against a plummeting currency exchange rate is less important and should accordingly take a lower percentage in your diversification strategy.  However, if you were in.. say... Argentina, for example, you would want to have a much larger percentage of your assets in precious metals. The EU has a lot of issues, and depreciation of hard assets courtesy of a lack of fluid currency/capital (and overspending on a lot of EU governments' parts in the past), in my opinion, lessens the preservative value of holding precious metals.  You want to diversify more heavily into precious metals just prior to government sovereign currency devaluations, whether by ""printing"" (by the ECB in your case) or by hot capital flows into/out of your country.  Since Eurozone is not an emerging market, and the current trend seems to be capital flowing back into the developed economies, I think that diversifying away from silver (at least in overall % of your portfolio) is the order of the day. That said, do I have silver/gold in my retirement portfolio?  Absolutely.  Is it a huge percentage of my portfolio?  Not right now.  However, if the U.S. government fails to resolve the next budget crisis and forces the Federal Reserve to ""print"" money to creatively fund their expenses, then I will be trading out of soft assets classes and into precious metals in order to preserve the ""real value"" of my portfolio in the face of a depreciating USD. As for what to diversify into?  Like the folks above say: ETFs(NOT precious metal ETFs and read all of the fine print, since a number of ETFs cheat), Indexes, Dividend-paying stocks (a favorite of mine, assuming they maintain the dividend), or bonds (after they raise the interest rates).  Once you have your diversification percentages decided, then you just adjust that based on macro-economic trends, in order to avoid pitfalls. If you want to know more, look through: http://www.mauldineconomics.com/ < Austrian-type economist/investor http://pragcap.com/ < Neo-Keynsian economist/investor with huge focus on fiat currency effects" At the time of writing, the Canadian dollar is worth roughly $0.75 U.S. Now, it's not possible for you to accurately predict what it'll be worth in, say, ten years. Maybe it'll be worth $0.50 U.S. Maybe $0.67. Maybe $1.00. Additionally, you can't know in advance if the Canadian economy will grow faster than the U.S., or slower, or by how much. Let's say you don't want to make a prediction. You just want to invest 50% of your money in Canadian stocks, 50% in U.S. Great. Do that, and don't worry about the current interest rates. Let's say that you do want to make a prediction. You are firmly of the belief that the Canadian dollar will be worth $1.00 U.S. dollar in approximately ten years. And furthermore, the Canadian economy and the U.S. economy will grow at roughly equal rates, in their local currencies. Great. You should put more of your money in Canadian stocks. Let's say that you want to make a prediction. The Canadian economy is tanking. It's going to be worth $0.67 or less in ten years. And on top of that, the U.S. economy is primed for growth. It's going to grow far faster than the Canadian economy. In that case, you want to invest mostly in U.S. stocks. Let's get more complicated. You think the Canadian dollar is going to recover, but boy, maple syrup futures are in trouble. The next decade is all about Micky Mouse. Now what should you do? Well, it depends on how fast the U.S. economy expands, compared to the currency difference. What should you do? I can't tell you that because I can't predict the future. What did I do? I bought 25% Canadian stocks, 25% U.S. stocks, 25% world stocks, and 25% Canadian bonds (roughly), back when the Canadian dollar was stronger. What am I doing now? Same thing. I don't know enough about the respective economies to judge. If I had a firm opinion, though, I'd certainly be happy to change my percentages a little. Not a lot, but a little. How can I calculate my currency risk exposure?  You own securities that are priced in dollars, so your currency risk is the amount (all else being equal) that your portfolio drops if the dollar depreciates relative to the Euro between now and the time that you plan to cash out your investments. Not all stocks, though, have a high correlation relative to the dollar.  Many US companies (e.g. Apple) do a lot of business in foreign countries and do not necessarily move in line with the Dollar.  Calculate the correlation (using Excel or other statistical programs) between the returns of your portfolio and the change in FX rate between the Dollar and Euro to see how well your portfolio correlated with that FX rate.  That would tell you how much risk you need to mitigate. how can I hedge against it?  There are various Currency ETFs that will track the USD/EUR exchange rate, so one option could be to buy some of those to offset your currency risk calculated above.  Note that ETFs do have fees associated with them, although they should be fairly small (one I looked at had a 0.4% fee, which isn't terrible but isn't nothing). Also note that there are ETFs that employ currency risk mitigation internally - including one on the Nasdaq 100 .   Note that this is NOT a recommendation for this ETF - just letting you know about alternative products that MIGHT meet your needs. "The answer from littleadv perfectly explains that the mere exchange ratio doesn't say anything. Still it might be worth adding why some currencies are ""weak"" and some ""strong"". Here's the reason: To buy goods of a certain country, you have to exchange your money for currency of that country, especially when you want to buy treasuries of stocks from that country. So, if you feel that, for example, Japanese stocks are going to pick up soon, you will exchange dollars for yen so you can buy Japanese stocks. By the laws of supply and demand, this drives up the price. In contrast, if investors lose faith in a country and withdraw their funds, they will seek their luck elsewhere and thus they increase the supply of that currency. This happened most dramatically in recent time with the Icelandic Krona." You could buy some call options on the USD/INR. That way if the dollar goes up, you'll make the difference, and if the dollar goes down, then you'll lose the premium you paid.  I found some details on USD/INR options here Looks like the furthest out you can go is 3 months. Note they're european style options, so they can only be exercised on the expiration date (as opposed to american style, which can be exercised at any time up to the expiration date). Alternatively, you could buy into some futures contracts for the USD/INR. Those go out to 12 months. With futures if the dollar goes up, you get the difference, if the dollar goes down, you pay the difference.  I'd say if you were going to do something like this, stick with the options, since the most you could lose there is the premium you put up for the option contracts. With futures, if it suddenly moved against you you could find yourself with huge losses. Note that playing in the futures and options markets are an easy way to get burned -- it's not for the faint of heart. About the inflation or low interest rates in both the countries is out of the equation especially since rupee is always a low currency compared to Euro. You cannot make profit in Euros using rupee or vice-versa. It all depends on where you want to use the money, in India or Europe? If you want use the money from fixed deposit in Europe, then buy fixed deposit in euros from Europe. If you want to use the money in India, then convert the euros and buy FD in India. The best way to do this would be to exchange the funds into USD and wire the funds to your bank account in the US. It is up to you whether you want to hold USD or Euros.  Depends if you plan to invest money in the US. A currency that is strong right now is one that is expensive for you to buy. The perfect one would be a currency that is weak now but will get stronger; the worst currency is one that is strong today and gets weak. If a currency stays unchanged it doesn't matter whether it is weak or strong today as long as it doesn't get weaker / stronger. (While this advice is correct, it is useless for investing since you don't know which currencies will get weaker / stronger in the future).  Investing in your own currency means less risk. Your local prices are usually not affected by currency change. If you safe for retirement and want to retire in a foreign country, you might consider in that country's currency. Rather than screwing around with foreign currencies, hop over to Germany and open an account at the first branch of Deutsche or Commerzbank you see. If the euro really does disintegrate, you want to have your money in the strongest country of the lot.  Edit: and what I meant to say is that if the euro implodes, you'll end up with deutschmarks, which, unlike the new IEP, will *not* need to devalue. (And in the meantime, you've still got euros, so you have no FX risk.) If you are confident that the US Dollar will recover compared to the Australian Dollar then you could use your Australian dollars (assuming you have some) to buy an ETF that tracks the value of the USD. Then after the USD makes its run (or after the Australian dollar falls) you can cash out and claim victory. If that's not quite your situation, or if you want to learn more Investopedia has a great article that talks more about investing in currency ETFs and mentions a couple other options out there. "Currency, like gold and other commodities, isn't really much of an investment at all. It doesn't actually generate any return. Its value might fluctuate at a different rate than that of the US dollar or Euro, but that's about it. It might have a place as a very small slice of a basket of global currencies, but most US / European households don't actually need that sort of basket; it's really more of a risk-management strategy than an investment strategy and it doesn't really reflect the risks faced by an ordinary family in the US (or Europe or similar). Investments shouldn't generally be particularly ""exciting"". Generally, ""exciting"" opportunities mean that you're speculating on the market, not really investing in it. If you have a few thousand dollars you don't need and don't mind losing, you can make some good money speculating some of the time, but you can also just lose it all too. (Maybe there's a little room for excitement if you find amazing deals on ordinary investments at the very bottom of a stock market crash when decent, solid companies are on sale much cheaper than they ordinarily are.)" "No, this is not solid advice. It's a prediction with very little factual basis, since US interest rates are kept just as low and debt levels are just as high as in the Eurozone. The USD may rise or fall against the EUR, stay the same or move back and forth. Nobody can say with any certainty. However, it is not nearly as risky as ""normal forex speculation"", since that is usually very short term and highly leveraged. You're unlikely to lose more than 20-30% of your capital by just buying and holding USD. Of course, the potential gains are also limited." "A general principle in finance is that you shouldn't stick with an investment or situation just because it's how you're currently invested. You can ask yourself the following question to help you think it through: If, instead, I had enough GBP to buy 20000 CHF, would I think it was a good idea to do so? (I'm guessing the answer is probably ""no."") This way of thinking assumes you can actually make the exchange without giving someone too big of a cut. With that much money on the line, be sure to shop around for a good exchange rate." If the intention is after maturing to convert back the Rupees into Euro, its not a good idea.  Generally the interest rate in Euro and the interest rate in Rupee are offset by the predicted exchange rate. i.e. the Rupee will fall compared to Euro by similar rate. The point at Step 5 is generally what is expected to happen. At times this can be less or more depending on the local / global factors. So on average you will not make money, some times you will loose and sometimes you will gain. Plus I have shown flat conversion rates, typically there is a Buy Rate and a Sell Rate for a pair of currencies. There is a difference / spread that is the margins of Bank. Typically in the range of 2 to 4% depending on the currency pairs.