Forex Offshore Profits

There are times when moving money offshore is profitable. This may be because return on investment is better offshore and it may be because the value of the offshore currency goes up after you move your money. Forex offshore profits can occur in either case. One example was the Yen carry trade a few years ago and another is the recurring volatility of the Colombian peso versus the US dollar. Garnering Forex offshore profits requires that you pay attention to both Forex fundamentals and Forex technical strategies.

Yen Carry Trade

For years interest rates in Japan were very low and interest rates in the USA were substantially higher. It was a common practice for a Forex trader to borrow money, YEN, at a low interest rate back home and then convert the YEN to dollars. He would then buy a bond in the USA with the money. The profit would be the difference between the rate of interest on the loan which was virtually zero and the rate of interest on the bond which some years back would have been four to five percent on a treasury note. This route to Forex offshore profits worked so long as the value of the US dollar did not fall substantially against the YEN. If the dollar went up in value versus the YEN it simply increased the Forex offshore profits in this case.

The Colombian Peso

Over the last several years the Colombian peso has varied from ten percent to twenty-five percent versus the US dollar. Swing trading the US dollar against the Colombian peso could have resulted in profits of as much as twenty-five percent in a given year. As noted in the CIA World Fact Book,

Colombia’s consistently sound economic policies and aggressive promotion of free trade agreements in recent years have bolstered its ability to weather external shocks. Real GDP has grown more than 4% per year for the past three years, continuing almost a decade of strong economic performance. All three major ratings agencies have upgraded Colombia’s government debt to investment grade. Nevertheless, Colombia depends heavily on energy and mining exports, making it vulnerable to a drop in commodity prices. Colombia is the world’s fourth largest coal exporter and Latin America’s fourth largest oil producer.

To a large degree the value of the peso goes up and down with commodity prices so that a guide to Forex offshore profits with trading the peso is to keep a close eye on oil, coal, etc.

Long Term Offshore Investment and Forex Offshore Profits

An alternative to trading currencies to gain Forex offshore profits is to look for promising investment opportunities in growing economies. Then you can get into investments cheap when a currency is cheap and reap profits locally from the investment and also from an improved exchange rate if you choose to repatriate profits back to your home currency.