[bizaro86]

Originally Posted by Wormius

But your money is not saved as CDN dollars in those overseas accounts. It is converted to say, pesos, which could undergo deflation with respect to CDN.

For example, if somebody invested $150,000 CDN and that was converted into 1,500,000 pesos, deposited and made 6%. So you want to cash out after a year, and you have 1,590,000 pesos.

Well, unfortunately the peso didn't do so well that year, and now instead of a peso being worth $0.10 CDN, it's now worth just $0.07 CDN. After withdrawing your money and converting back to Canadian, now you're left with $113,000 CDN. That 6% interest doesn't look so great.

That was an exagerated example, but its to illustrate the point that you can't just assume that because an overseas account is making all of that interest that you can dump your CDN money in and you'll be rich.

In almost all cases the interest rate differential is exactly equal to the amount you can expect to lose on the currency per year. You can check currency futures to make sure.