High return savings accounts 12.5%

[JustaDreamer]

While I was overseas I found this:

http://www.indochinabank.com/products_and_services/fd_sub.html

But what I dont understand how they can offer different interest rates based on different currency.



If I transfer $10,000 AUD into a Lao bank it becomes 83,689 LAK its still worth the same amount.

Can someone please explain this to me.

 

[Aaron_C]

It's because each country has their own interest rate / economical system. Australia, for example, has historically high rates for both deposits and loans. That is why putting your money into Australia yields better absolute returns (excl FX risk) than say America right now. Same thing with Laos - I don't know anything about their system but if they have systemically higher rates than that would be reflected in the returns offered for term deposits. It doesn't matter whether it's worth $X or $Y in AUD.

 

[starter]

The higher returns also reflect the forex risks. Have you looked at how much the LAK has depreciated against other currencies historically?

 

[mattnz]

I'd suggest it mostly reflects the risk of the deposit taker. They are offering 7% on USD 24 month deposits!! If they were a good credit risk, hedge funds would be borrowing at 0.25% with essentially free money and arbitraging the interest rate differential.

 

[zed_kid]

sovreign risk anybody?

 

[Aaron Sice]

what are the interest rates in Laos?

if std bank rates are 18%, then 12.5% seems like a no-brainer.