Fodor's Travel Talk Forums - convert currency now for summer euro trip?

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convert currency now for summer euro trip?

Hello Fodorites, I am going to Europe this July. With the strong dollar should I buy my currency now (Francs and Pounds)to take advantage of our Dollar strength or should I wait and convert dollars to the currencies in July? Thanks

Hi Mike, It's a long time from now to July and the US dollar strength is still on the rise. Buying any foreign currency now is not the thing to do. If you're nervous that the dollar value may drop you could keep watching the rates and make your decision closer to your trip. You also need to factor in the cost of buying foreign currency in the US. You won't get the same rate you will by using your credit card and many banks charge a processing fee for selling other countries' currency. I have started doing what many people here have suggested...charge everything I can because the exchange rate is better when using a credit card and bring backup traveler's checks in US dollars which, if not used, can be deposited in your checking account after your vacation to pay the credit card bills. Adrienne

I'm not an economist, but it seems to me that the dollar would have to fall quite a bit between now and summertime to make it worthwhile for you to buy foreign currency in the U.S. now. As the previously poster said, if you exchange money stateside, you won't come close to what you'd get over there.

The EC just released a forecast this week that asserts the euro in 2001 should average 6% above it's present exchange rate. I think that's optimistic. Let's assume they're correct. What will be your added cost of converting dollars to foreign currency in the US, now, as opposed to in the foreign countries, or using your credit card? Certainly 2-3% at best, and more likely 5-6%. In other words, in a likely best-case scenario you'll just about break even. The worst case scenarios might run to a 5% or 10% loss ... or more. It's a personal decision, of course, but for us currency speculation is something better left to the professionals. Ed

Hi Mike, lets look at it this way. Two basic facts: 1. today 1 franc costs .1281 cents in Paris. 2. Buying French currency where I live costs me 5% more than the Paris rate. You have two basic strategies to consider: (1) Buy now and hold (2) wait until July. I figure that to reach a 0 breakeven point, the franc would have to rise 8.25% in value. Here is my logic. If you buy now, you will own currency that earns no interest, and you paid more for it. If you wait, you can earn interest on the money and buy at a cheaper rate, regardless. Based on a purchase of 5000 francs, the buy and hold strategy would cost you $51.00 more than the wait strategy, holding the cost per franc equal. Basic cost of 5000 francs today in Paris: $640.5 Cost less 6 months earned interest: $621.285 Cost of 5000 francs today at my bank $672.53 So there is a difference of about $51.00 between the two strategies. If the franc increases more than 8.25% between now and July, you win. Anything less than an 8.25% increase, you lose.

I'd echo what others have said, and add that the pound is *not* pegged to the Euro and isn't at all weak against the dollar at the moment--quite the opposite. So you're not likely to gain much by getting pounds in the US now and adding the fees and lousy rate for exchanging over here to an already disadvantageous dollar-pound exchange rate.

Mike, Furthermore, you lose use of the money for 9 months, if you convert it now. Parked in a typical money market account, that's 5-6% annualized interest.

Dear Fodorites, Thanks for setting me straight. I'll wait. Mike