EC250 Lecture Notes - Interest Rate Parity, Canadian Dollar, South African Rand
Document Summary
In today"s financial post there is an article about currency investing. basically, some people are worried that the us dollar will fall because of political problems in the us. These people buy the chinese yuan or baskets of currencies that are resource- linked: the australian, canadian and new zealand dollar as well as the south african rand. The total amount of such investments is, however, relatively small. The article mentions something we have been studying: investing in foreign currencies because of high return. One bank is offering 5. 75% on the brazilian real. But remember that for the investment to be profitable, the real cannot depreciate too much. Because of the weakness of the canadian economy, inflation has been low. In an interesting article that you should read, the author discusses whether statistics canada inflation numbers can be believed. It is higher for necessities (food) than for more expensive items (electronics, cars).
