Thinking ahead in a foreign currency

ANYONE with pounds 1,000 can join the currency traders and follow their hunch on currency movements.

The high street banks will allow customers to open current accounts in foreign currencies, which usually pay no interest, or deposit accounts, which pay some. But the interest rate on the US dollar is minute. NatWest, for instance, pays 0.125 per cent gross on deposits up to dollars 10,000 and 1 per cent on larger sums.

A spokesman for NatWest said accounts in foreign currencies could be opened at any branch, and were usually taken by people planning to spend money in that currency in the future.

'I would recommend somebody who is planning a US holiday in the future to think seriously of buying dollars now and putting them on deposit, but simply speculating when you have got no reason to spend dollars is not normally a good idea,' he said.

Investors can also use an offshore currency fund. Fidelity has a choice of 15 currencies through its money funds with no minimum investment. Fidelity Investments' executive director, Graham Barker, said 'the man in the street' was becoming more interested.

Rothschilds Asset Management offers the choice of 18 currencies also with no minimum investment.

The interest on money funds rolls up gross. Annual charges are 1 per cent and there are no entrance, exit or switching charges. But investors tempted to speculate have to be prepared to take a loss if currency movements go against them.