Currency Exchange - too good to be true?

Well what you are entering into is, effectively, a futures contract. YOu are agreeing to buy now at the price set in teh future. Obviously the seller is counting on the rate being higher than 2.12 to the £ in April which, in the current climate, would be expected. If you're asking people whether this is a good deal...well if we knew that we'd all be millionaires! Things to consider....

1) Are US interest rates going to fall between now and April? Personally? Probably yes. In which case Sterling will rise aginast the dollar.

2) Is the UK consumer confidence going to fall? If so will the BoE reduce UK interest rates if people stop spending? Well, do you feel confident about your job/money/financial prospects?

If you ask my personal opinion I think an exchange rate of $2.12/£1 is pretty good but I can;t see it being much lower in April..but then I'm not a foreign currency speculator!

The pros.
You are locking into a better rate than you can get TODAY

If the $ recovers, then you have an even greater rate

The negs

If the $ was to continue to slide, then it might not be such a great rate.
You are locked in- no refunds. end of

The Alternatives.
Travelex rate today $2.028
TEG rate today $2.06

Travelex will price match TEG . See MY GUIDE how to claim. You can however sit on that up to 24 hrs b4 cashing in, per their cancelation policy
So in effect you can hedge at £2.06 if it drops great you get £2.06 (or effectively) with cashback.
If it goes the other way 24hrs b4 cash in , simply cancel the transaction and re order.

Once again, you have choices. select RIGID $2.12 or Flexible $2.06.(equivelent)

Are you a gambler or safe?

Safe = $2.12 great rate BTW. Gambler could hit $2.20 + or drop back below $2.00
I reckon US are goosed- Id gample personally

Another factor to consider is the interest rate lost when you buy today rather than later. April 08 is almost 6 months away. At a 5-6% savings rate, you are losing about 2.5-3% interest on the money.

Thus you can consider that they are selling it to you at a 2.06 rate today and they are just keeping the 2.5-3% interest themselves. So, the deal is not really different from the 2.06 TEG today.

In this particular situation, you'd be getting a pretty good deal (at today's values) and if you're traveling around April 08, I'd recommend it as it's effectively buying at the high point of today's currency exchange (2.06) and allowing you to still hold on to the interest over that period (you're getting the 3% gain in the exchange rate over the time). So, you're not losing out on holding cash.

Also, if you look at the futures market for March 08, it's at almost 2.09, and the high was 2.106. So 2.125 is even more optimistic than the pro futures traders. Also, those are market rates, and you wouldn't really get that during an exchange as individuals don't get market rates.

So, getting a company to offer you an exchange at 2.125 would mean a market rate of about 2.145 at that time, and that is almost 2% higher than even the highs in the future market...

I think you may have found an all-around good deal! I may repost it with an explanation.

photome wrote: »

Many so called "experts" are predicting a rate of 2.15 by the spring

Woops, I didn't mean to Thank you

1. Experts aren't really confident unless they're putting their money in the market. The futures market is not seeing that high of a jump, so I would be wary of any experts who are predicting much higher than the futures markets (because if they really felt that way, they'd be buying up those futures and making a killing, which would then drive the futures markets up toward nearer where they were predicting).

2. Even if this goes up to 2.16 or 2.17 this is still an excellent deal for people needing money around that time, because you don't get market rate when you exchange, you get about 2% less.

For more details, see my post I just laid out:
http://forums.moneysavingexpert.com/showthread.html?t=594855


You know that I'm as skeptical as anyone about speculating, but I argue in my post that this makes a great deal even for those who don't want to speculate, as you're getting a high market premium (even at future rates) or you can look at it like you're buying USD today and sticking them in a very high yield savings account.

alchemista wrote: »

Woops, I didn't mean to Thank you

1. Experts aren't really confident unless they're putting their money in the market. The futures market is not seeing that high of a jump, so I would be wary of any experts who are predicting much higher than the futures markets (because if they really felt that way, they'd be buying up those futures and making a killing, which would then drive the futures markets up toward nearer where they were predicting).

2. Even if this goes up to 2.16 or 2.17 this is still an excellent deal for people needing money around that time, because you don't get market rate when you exchange, you get about 2% less.

For more details, see my post I just laid out:
http://forums.moneysavingexpert.com/showthread.html?t=594855


You know that I'm as skeptical as anyone about speculating, but I argue in my post that this makes a great deal even for those who don't want to speculate, as you're getting a high market premium (even at future rates) or you can look at it like you're buying USD today and sticking them in a very high yield savings account.

I dont disagree with you..thanks for thanking me...:j

By "experts" I mean the financial pages in the papers, I know I shouldnt believe anything I read in the papers. I am hoping that I will get near that rate in march using my nationwide debit card in the US.

It is a great rate for all those buying now at $2 in the PO etc who are not travelling for 3 to 4 months...there are lots on here doing exactly that...crazy !!