It looks like if I convert a dollar to euros and then convert the euros to pounds I wind up with more money than if I convert directly from dollars to pounds.

Is this correct and is it do-able?

Hi hunter,

You have discovered "arbitrage".

Remember, there is a fee for making each exchange.

If you have many millions of dollars to move around and spend your entire day engaged in the game, you *might* make money.

Be sure you are using the right numbers and dividing/multiplying correctly.

Rarely should the difference be more than a penny or two. If you are coming out ahead by more than a penny on the dollar, you probably divided where you should have multiplied.


Also, the buy/sell rates at different banks are usually about 5 cents or more apart. So currency exchange, like thermodynamics, is a no-win science.

In fact you will most probably lose money because you have to pay a fee for each conversion - which you probably haven;t calculated in.

yes, youre right they come out the same...

Is there a good place online to teach about how to exchange money/ what fees are charged, etc?

www.xe.com

This is called playing the money market. If you could make a lot of money doing it... everyone else would be in on the game and would no longer work. Good thinking though. I make or loose money as I go back and forth between Michigan and Canada. Large amount must be documented. Again, a no win situation.

I think you need to look at buy and sell rates. You cannot have your cake and eat it too.
If such was the case, millions of euro or pounds would move in an instant via computer trading and beat the rates back into balance.

PS in theory you might see a slight difference, but I doubt it.

The closing exchange rates on Yahoo were:
1€ = $1.2124
1£ = €1.4965
1£ = $1.8143.

Convert $100 to € = 82.4810 (100/1.2.14)
Convert 82.4810€ to £ = 55.1159
(82.4810/1.4965)
Convert $100 to £ = 55.1176
(100/1.8143)

I have a hunch that the difference in the 3rd decimal place is because Yahoo does not report exchange rates in 5 decimal places. As a result there is a slight difference in the thousandth of a cent position that probably would not exist if the initial rates had been presented with a precision of 5 decimal places.

In reality you pay the buy rate each time and you will loose. Once you had euro notes in your hand, you would need to convert them pounds, and that would mean a different style of transaction.

If you were at an airport cambrio window, you would see about 10% of your starting $100 disappear in fees very quickly.

For the little guy dealing in amount of less than $100,000 I doubt if you can do it without paying substantial fees.
In the US, my experience has been you pay 4% if you are selling dollars to buy euros.

If you can beat these rates, and turn a profit, then go to it with a few thousand and turn a profit. I doubt if you can do it. Afterall, these money merchants make a killing everyday by swapping billions. Some amateur off the street is not likely to make a windfall profit unless someone is asleep and posts the wrong figures on the big board.