Convert sterling to euros?

DiscoPaul_2

jzi19 wrote: »

Back in October '07, I exchanged some currency for some Hong Kong Dollars and China RMB as the rates were favourable at the time and I was travelling there to see familly. I never converted it back into sterling and only gave it some thought this weekend. Astonished to see it is worth 40% more today. Sure I can cash it in now and profit a few thousand pounds. The only problem is, I have relatives there and right now, it would cost 40% more to go over there. Smart money tells me I may as well keep hold of it to absorb the high cost.

Exactly. If you ravel there often, there is no need to sell and make a profit. As you will only end up losing out when you make the trip and have to spend more.

I live and work in ROI and when I travel home it is extremely cheap, but this only applies when I transfer money home/go home. Otherwise my cost of living is exactly the same. If I can't afford to transfer money back to my UK account, I don't notice any difference.

ballyblack

From Citywire today, see last Paragraph

Where next for the pound?

By Nicholas Paler | 14:40:39 | 23 January 2009

The pound has fallen more than a third in the last 14 months against the dollar from its high of more than $2 at the end of 2007.
Today it dropped further still, to lows not seen for almost a quarter of a century, after plunging more than 3 cents in a single session to as low as $1.3503 as panicked investors shunned the currency as evidence emerged that the UK was in a recession.
Fears about the decline of the UK economy have driven much of the selling of the pound in the last year, while the mounting debt pile has also pushed it lower with worries that the UK may need bailing out exacerbating falls.
Another factor which has pushed the currency down so rapidly is the ferocity with which interest rates have been slashed by the Monetary Policy Committee (MPC) as it took drastic action to avert a major recession by reducing rates from a peak of 5.75% to 1.5%.
More to come
So where do we go from here? Many experts are preparing to see further falls in the near term as more woeful economic data and negative sentiment about the UK economy force the pound down.
Economists argue there is room for the pound to fall further still against the greenback.
Roger Nightingale, a leading UK economist and commentator, said that with the authorities content to forego any measures to stimulate the pound further falls were likely.
He argued that continued falls would provide a boost to exporters and entice people to Britain on holiday, something the UK government would like to see, while there is also no threat from rising inflation.
'We don't have any official function to support sterling at present and sentiment is bad,' Nightingale said.
'Therefore I can't see anything supporting sterling against dollar as sentiment is everything and at present that is hurting sterling.'
While there would be an issue for the stability of the economy if the pound continued to drop for a significant time, Nightingale said the currency would have to drop a lot further still before declines put the banking system at risk and forced the authorities into action.
'There are rumours that banks have huge foreign debt liabilities and that these debts could rise to horrific proportions with sterling's weakness,' he said.
'But it would have to go a lot further and put banks at risk.'
Autumn recovery?
JPMorgan's global strategist, Tom Elliott, agreed there could be further drop in sterling against the dollar in the near term, although he said that currency tended to overshoot when it moved and he expected a recovery later in 2009.
'Sterling isn't cheap at present as there will be a period of further strength for the dollar until around late spring/summer, and then we might sees some strengthening of sterling,' Elliott said.
He said while the US economy was also in a difficult position and had to face up to a very large budget deficit, and some retrenchment of the dollar was therefore expected, more drops in sterling were likely in the near term as the banking sector threw up its final surprises.
Elliott concluded: 'We've yet to see the final leg down against the dollar and banks revealing total debts will cause that. Then sterling can recover some ground.'
However, despite the falls, other experts argued that a correction could be seen imminently.
Sharing the pain
Charles Stanley Stockbrokers’ director of private client research investment strategy, Jeremy Batstone-Carr, said he was bearish on the US currency because of the huge budget deficit the country was creating through its fiscal stimulus plans.
He said sterling was chiefly being sold because of the dire state of the government's finances, the actions of high profile investors who have publicly shunned it, and potentially because of the government's handling of the crisis. But he said other regions were also experiencing similarly severe economic headwinds.
'The Eurozone and the US are just as close to bankruptcy as the UK, governments there have seen huge increase in borrowing and money supply, and the fundamental backdrop is as dire for all of them,' he argued.
'Given the UK is not so much worse than anywhere else, I would expect to see the pound recover against the dollar - and I think the dollar could weaken as early as next week against sterling after the Fed meets, as it is expected to increase quantitative easing (to tackle the slowdown in the US) which means more weakness.'
Batstone-Carr thinks that the US currency is set to collapse because of its spiralling debt which had made the country insolvent.
He said there was a feeling that the dollar was 'hugely overvalued', with sterling oversold against it, and he warned that it could fall apart in 2009 when trading countries realise the US is no longer solvent.
'The US has now become the world's largest debtor nation (in absolute terms). The time will inevitably come when trading countries wake up to the reality that the US is no longer solvent,' he said.
'At that point they will stop lending money (or more accurately, start using dollars to buy euros or yen or gold rather than US Treasury bonds) and the dollar will collapse.'
While not as bearish on the dollar, the head of currency management at Investec Asset Management, Thanos Papasavvas, added that sterling offered good value now, especially in the long term, compared to the dollar.
While Investec is a buyer of sterling at current levels, Papasavvas warned that with equity markets potentially set to fall another 20% or more, investors could once again flee to the safe haven of the dollar, weakening the pound yet more.
'We don't expect equity markets to fall that far but there is a 25-30% chance that things could go that bad, and that could take the pound down to all time lows of around $1.05.’
Weakening euro
Meanwhile against the euro, investors were more united in their expectations for sterling, and even expressed surprise that it had not reversed losses as yet.
Trading at all time lows against the euro for some time, at around €1.0638 on Friday following further declines, Papasavvas said Investec had been disappointed so far that it had not stabilised against the euro as yet.
Nightingale added that the euro was set to fall further than sterling soon, given the region is faced with a 'grinding slowdown' and he warned a break-up of the euro was even possible, while Elliott said he expected the pound to stabilise against the European single currency sooner than against the dollar.
Batstone-Carr added: 'The Eurozone economic recession could prove to be one of the more enduring recessions globally, and against the euro sterling looks oversold.'