Locking in good currency exchange rates

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Oct 6th, 2008, 03:27 PM
  #1
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Locking in good currency exchange rates

The $$USD is the highest it has been against the South African Rand in five years. Today 8.6 Rand to 1USD. A year ago it was close to 7 Rand per 1USD, at 8.6 a 23% increase. (Other African country currencies also now weaker against the USD). I’m thinking of going back to South Africa again next year (Sep) on safari. Many camps quote rates in Rand. If I make camp reservations and if the Rand goes to 9 per 1USD, I would probably like to lock in that exchange rate. I can think of only two ways to do it and both have the disadvantage of tying up my cash (the cost of camps) for the whole year until Sep 2009. First, I could pay for the camps now (or when the Rand is 9 to 1). Or, I could buy Rand at 9 to 1 and save it to pay for the camps later. Both ways tie up my cash for about a year and thus will cost me about 6% interest, or, .5 point loss for the exchange.

Any more “creative” ways to accomplish this??

Of course, perhaps, the exchange rate could go even higher than 9 to 1 and I should wait for that???

regards - tom
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Oct 6th, 2008, 04:50 PM
  #2
 
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wait for the ringing bell. it does ring at prime time ;-)

honestly:

i would build up a rand account! buy slowly or aggressively - depending on tolerance - in order to spread the risk.

you either have the 6% interest rate or a chance to get a good exchange rate.

or rob a bank closer to the time ;-)

div
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Oct 7th, 2008, 07:53 AM
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Where are you getting 6% interest?
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Oct 7th, 2008, 08:33 AM
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6% interest, paying it, borrowing, what cash would cost me. Home equity loan at bit less than 6%. If I put out say $5,000 cash now to pay for the safari, the cash would come from (borrowed from) the home equity loan. 6% for a year of $5K is $300 additional cost. Thus the safari costs me $5,300.

Or, looking at it from the Rand perspective. Say the camp cost is 45,000 Rand. Pay for it now at 9 to 1 and the cost to me is $5,000USD plus $300 interest cost, total $5,300. Or, pay 45,000R in Sep 2009 at a lower rate of 8.5 to 1 and the cost to me is same $5,300.

Obviously the best way would be to pay the 45,000 in Sep 2009 at 9 to 1 then cost is $5,000 total. But will the exchange rate be 9 to 1 in Sep 2009? More or less?

regards - tom
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Oct 7th, 2008, 11:23 AM
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Gotcha, I thought you found a bank to pay you 6%. I wouldn't borrow to gamble on the exchange. What if it's 9.5:1 in Sep 2009?
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Oct 7th, 2008, 11:50 AM
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Yep, could be 9.5 or 5.9 in September.

regards - tom
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