- The Washington Times - Tuesday, March 25, 2003

Some investors who are disappointed by low interest rates in the United States are buying certificates of deposit and opening savings accounts in foreign currencies, allowing them to take advantage of higher rates overseas.

The weak dollar and shaky stock market also have made foreign currencies more attractive. The best part, investors say, is they don't need their passports to make the transactions.

Everbank in St. Louis sells CDs and opens money market accounts in foreign currencies online through its Web site, Everbank.com. Executives and analysts say it is the only bank in the nation to give retail customers this option.

Everbank's deposits in foreign currency have doubled to more than $190 million in the last year, said Frank Trotter, the bank's president and chief executive.

"People have seen pretty good returns in the last 12 months. These things have become extraordinarily popular," he said.

Foreign-currency deposits aren't for the casual investor. It can take as much as $20,000 to start one of Everbank's world currency accounts, but the payoff is often significantly higher than investing the money in U.S. dollars.

The Federal Reserve has kept U.S. interest rates low in an effort to boost consumer spending. The typical one-year U.S. bank CD pays 1.78 percent interest, says Bankrate.com, a personal-finance Web site.

Everbank offers a one-year CD denominated in Norwegian krones that pays 4.63 percent, one denominated in New Zealand dollars that pays 5 percent and another denominated in Australian dollars that pays 4.13 percent.

Customers must have a minimum $10,000 to open most of the foreign-currency CDs.

Everbank world currency accounts also include multicurrency index CDs, such as the European Opportunities CD, which covers the currencies of Hungary, Poland and the Czech Republic. The minimum investment is $20,000.

Everbank also offers savings accounts in foreign currencies that can be opened with a minimum of $2,500.

Each Everbank world currency account is covered by the Federal Deposit Insurance Corp.

A weak U.S. dollar also is making Everbank's world currency accounts more popular, Mr. Trotter said.

A year ago, investors could buy a euro for 88 cents. Today, the European currency costs $1.06, an increase of more than 20 percent. A CD denominated in euros would give consumers the same gain, plus interest.

Despite the popularity of Everbank's world currency accounts, investors aren't necessarily fleeing the U.S. dollar. An estimated $635 million was invested in international bond funds in January, but investment fell to $550 million in February, mutual-fund tracker Lipper Inc. reported.

Investment in international bond funds is just "a trickle," said Andrew Clark, a Lipper analyst.

"People don't tend to invest outside their home countries," he said, adding that $635 million may sound like a lot of money, "but keep in mind that the outstanding bond market is measured in trillions."

Customers can invest in Everbank's world currency accounts by completing online applications at the bank's Web site or phoning its call center, which Mr. Trotter said is staffed by experienced bankers.

Everbank does not charge monthly fees or commissions on its world currency accounts. Customers pay conversion fees, which vary based on the size of the transaction. The bank does not charge a fee to transfer money into or out of an account using foreign wires, but customers pay about $25 if the money is transferred using a domestic wire.

Customers pay U.S. taxes on the accounts once they have converted the currency back into U.S. dollars.

Mr. Trotter recommends devoting between 5 percent and 20 percent of personal investments to foreign currency. "They're not for everybody. It's not for the older person living on a fixed income. It's for someone in the investing part of their life," he said.

Personal-finance columnist Terry Savage recommends the accounts but warns about their risks.

"A resumption of economic growth in the United States might make the dollar more attractive again. Or terrorist activities in Europe might cause a flight to the safety of the dollar. But we're learning every day that we live in a small world," Ms. Savage wrote in February.

Some Everbank customers are bullish on the world currency accounts, calling them some of the financial world's better-kept secrets. Two customers, who asked that their names not be published, said foreign-currency investments had become substantial parts of their portfolios.

A retired Florida physician said about 60 percent of his portfolio was invested in foreign currencies. The man said he turned to Everbank last year after losing more than $130,000 in more traditional investments.

His first investment at Everbank was the European Opportunities CD. Later, he invested in Everbank products that covered Norwegian, South African and Mexican currencies.

"I don't consider them risky because I only do them for 90 days at a time. I just roll them over," he said.

A California woman said she has less than 20 percent of her portfolio invested in foreign currencies, primarily the euro. Like the Florida retiree, she said she tends to invest in short-term products like 90-day CDs.

"The nice thing is you can get out of it so quickly. You just have to stay on top of it," she said.

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