(Probably dumb) exchange rate question
 

I'm an American going over to Italy next week and as I'm sure you Fodorites know the U.S. dollar has hit a record low against the euro. My Czech grandparents just gave me some money in Czech crowns for Christmas--I gather it makes sense to convert the crowns (which are also strong against the dollar) to euros upon arrival in Bologna rather than to convert dollars/use my U.S. credit cards. Does that sound right? I know I'll be losing out on the exchange rate, but that would be the case anyway...

I'm not financially minded and this is a little complicated for me!

thanks!

Your thinking is correct - you will do better just changing the koruna into euro. Each time you make a transaction you lose a bit to fees, so the fewer the transactions the better.

Thank you Seamus, that's what I figured--though I do want to make clear that I didn't mean that I would change crowns into dollars, then into euros, rather I am trying to decide between converting the crowns to euros, or saving those for some future trip and just converting U.S. dollars into euros. (It seemed from your response that you thought somehow I would be doing more than one transaction in one of my scenarios--goodness this is complicated!)

What are you planning to do with those Czech crowns if you're not using it for your trip to Italy?

What does the USD/EUR exchange rate have to do with this?

One can argue that since the USD may sink further, it's better off for you get rid of your USD sooner and hang on to those crowns.

Sorry I guess I didn't explain this well. Let me try again--I really appreciate the help:

I'm American, so my currency is the US dollar. Typically if I go to Europe I withdraw cash there using my US ATM card and use my US credit cards, which obviously exposes me to the terrible--and dropping--USD/euro exchange rate.

As it happens, I have several hundred dollars in crowns right now, and so I'm wondering if I should just use those in Italy (changing them into euros) INSTEAD OF withdrawing cash and paying with my US cards. So that's why the rate is relevant here.

I hope that makes sense. Rkkwan I'm intrigued by your idea of hanging on to my crowns, but I'm not sure I quite understand :) Wouldn't I still be losing money by exchanging dollars into euros?

thanks again!

mp413 - You lose money exchanging crowns to euro. You lose money exchanging US dollars to euro (whether actual cash or using a credit card). Little difference.

What I want to say is that you have some crowns. What are you going to do with them if you spend them? If you're not going to the Czech Republic anytime soon for a visit, then you should exchange it to euro and spend it in Italy, no matter if the euro is worth US$0.8 or US$1.6.

Sorry, I mean, "what are you going to do with the crowns if not spending them?"

today, your USD is worth what it's worth and your koruna is what it's worth. knowing the values of the currencies in the future is your only deciding point on which is better to sell....and nobody here knows what will happen with the currency market in the future.

it's like asking if you should sell your classic car or your house...it depends what direction the values are going in the FUTURE. PAST appreciation or depreciation is completely irrelevant.

i think this is what rkk was saying also.

if it were me i'd hang on to the koruna and visit czech in the future. i'm guessing here but i think your czech grandparents may have given you this money in koruna for a reason.

The only problem in holding onto the czech currency for a while is that at some point in the future, the Czech Republic will most likely convert to the euro (euro are very widely accepted in many parts of the Czech Republic as it is)...and then if past experiences are any indicaton, those with the old czech currency will be given a limited amount of time to exchange czech currency for euro and after that a period of time to bring unused czech currency to a central bank for exchange into euro and after that the currency will be worthless.

When this will happen may have been published or speculated about but it is in the cards.

I am starting to see what you guys mean...I wasn't thinking so far in the future, but was just considering this trip in particular, which is why it seemed advantageous to avoid using dollars. I don't know if I'll have an opportunity to use the crowns anytime soon, though I usually go to Prague about once a year (hence the gift in crowns) so it's not unlikely. So, if I use the crowns now in Italy, I'll end up needing to spend dollars in Czech Rep., which would be a bad idea if the dollar keeps going down, but not if it spikes back up. Which gets to your point about trying to speculate, walkinaround.

Am I summarizing correctly? I really appreciate all the help thinking this through. It may seem obvious but I am just not wired to figure this stuff out :) But it sounds like if I use the crowns now, I'm betting that the dollar goes up (or that I get more crowns next Christmas!), whereas if I save my crowns I'm betting that it keeps going down...

Welcome to the world of currency speculation, mp413. Once you have decisions to make, whatever you do -- even if you do nothing when faced with choices -- you are speculating. You can't avoid it.

The next, more difficult, step is to make the right decisions. If you crack that, you are on the road to almost untold riches.

Don't you usually get a much worse rate changing cash than withdrawing from an ATM or using CCs?

If you're going to Prague once a year, then hang on to your crown and use them next time you're there!

Why spend unnecessarily on exchange fees between for the crown/euro exchange, when next time you have to spend again on USD/crown exchange?

Hi MP,

>it sounds like if I use the crowns now, I'm betting that the dollar goes up (or that I get more crowns next Christmas!), whereas if I save my crowns I'm betting that it keeps going down...

You are talking about only a couple of hundred E.

If you have 5000 CzK, it is worth about 310 USD.

5000 czk will buy you 199E.

310 USD will buy you 199E.

You were given a gift to spend. Spend it.

((I))