Government Collapses, Yet Icelandic Krona Still Higher Than the Rate Everbank used to Close CDs

You may have read that the Icelandic government collapsed this week. Despite the political turmoil, the Icelandic Krona is still trading significantly higher than the rate at which Everbank used to unilaterally close out several Icelandic Krona "CDs" as recently as last month. According to Forbes, the Icelandic Krona is trading at 160 to the US dollar. This is the offshore rate. In Iceland, the Krona was trading at the even higher rate of 122 to the dollar. In October and again in December, Everbank closed out several CDs at around 250 to the dollar.

Everbank WorldCurrency "CDs"- All of the Risk, One Third of the Return

In a previous post, I compared Everbank's WorldCurrency "Certificates of Deposit" to foreign currency exchange traded funds (ETFs). Foreign currency ETFs are far superior investments, in my opinion. When you invest in a foreign currency ETF, you can specify a rate of exchange (by way of a limit order) and move in and out of the ETF at will, since it trades like a stock. When you invest in a WorldCurrency "CD", Everbank decides the rate of exchange and your investment is locked in for the term of the "CD".

Moreover, the foreign exchange ETF pays a higher interest rate than Everbank. For example, the rate the CurrencyShares euro ETF currently pays is almost three times the rate that Everbank pays for its euro "CD". You read that right, the euro ETF pays about 300% the interest that the WorldCurrency euro "CD" does. In fact, in every case where an interest rate is paid, the CurrencyShares ETF pays a substantially higher rate than the comparable Everbank WorldCurrency "CD" rate.

Compare for yourself:

Everbank rates:
http://www.everbank.com/001CurrencyCDSingle.aspx

CurrencyShares rates:
http://www.currencyshares.com/home/CurrencyShares.rails