Tread carefully outside euro
There are a number of risks involved when savers put their cash into foreign currency accounts, explains Charlie Weston
SAVERS who put their money into foreign currency accounts to avoid exposure to the euro have been warned about the foreign exchange risk they are taking on.
Irish banks are losing deposits as savers and investment funds are increasingly getting spooked by the eurozone's debt crisis.
This has prompted a search for safe havens, a trend that could worsen economic and financial conditions.
Retail and institutional deposits fell 40pc at Irish banks in the last 18 months, compared with a fall of 19pc at Greek banks.
But financial advisers have cautioned consumers to tread carefully before opting for foreign currency accounts.
The warning came after the Swiss franc fell 8pc in the past fortnight.
Authorised adviser Eamon Porter of Aspire Wealth in Malahide, Co Dublin, said many people were unaware of the risk of a currency crashing in value or of being devalued.
"People think they are doing the right thing. But they do not realise there is a risk with everything. When a currency falls in value it can take ages for it to recover." The warning came as Investec launched a Danish krone account for Irish consumers.
After three years, savers have the option to covert their funds back into euro at the conversion rate when the account was opened.
There is a €20,000 minimum investment and interest of 1.25pc a year, but no access to the funds before the three years is up.
Investec, which is a South African bank, said it launched the Danish krone product on the back of demand, but is worried people do not appreciate the damage devaluation can do.
Aidan Ryan of the bank, said: "The biggest concern we have for retail consumers is the currency risk they carry should they transfer to an alternative currency, as I am sure we are aware the average retail consumer is completely unaware how much the foreign exchange market can move in a day, never mind a week or month."
Irish banks will open a foreign currency deposit account for customers. AIB, National Irish Bank, Permanent TSB and Ulster Bank offer non-euro deposit accounts to customers.
Bank of Ireland offers non-euro currency accounts to both personal and business customers.
The minimum opening balance is €2,500 equivalent in the non-euro currency for a demand deposit account.
For fixed-term deposits, the sterling minimum is £5,000, the dollar minimum is $10,000, an equivalent of €6,500 for other currencies.
Irish Independent Supplement