*Trying (desperately) to understand exchange rates!!

hybernia

Hubby and I are off to Spain in April and are wondering if now is "a good time" to buy Euros. I thought I'd look at the BBC News Red Button "Currencies" service for more information.

"Currencies" has four different sections: Tourist Rates, Pound Rates, Dollar Rates, and Euro Rates. I've been staring at the figures just now, concentrating only on the currencies we actually buy (the Euro and the US dollar.) Unfortunately, it's become obvious that I really am not bright enough to understand what I'm looking at:eek:.

Could some kind person who actually knows about these things please help??? Here are my questions -- in some places I've rounded up the figures for the sake of (my) simplicity:

Under "Tourists Rates" a Euro is 1.289 and USD, 1.4625. I presume those amounts are in £sterling, so therefore £1 of my money would buy me 1.29 Euros or $1.46. (Er, am I right?)

Under "Pound Rates", a Euro is 1.3372 and a USD, 1.4995. I'm still presuming the amounts are in £sterling, so therefore £1 of my money will buy me 1.34 Euros or $1.50. (Am I right? But if so, why is my £1 seeming to buy more at this rate than at the tourist rate?????)

Under "Dollar Rates", GBP is 0.6668 and Euro, 0.8917. Assuming that my "home currency" is American, does this mean that one of my dollars would buy me 67p (£GBP) or 89 cents (Euro)?

Under "Euro rates", GBP is 0.7478 and USD, 1.1214. Assuming that my "home currency" is European, does this mean that one of my Euros would buy me 75p (GBP) and $1.12 (USD)????

To summarise, then:

* where my Euro buying is concerned, it seems that a Euro is worth 75p ("Euro Rates") and that one of my pound coins will buy me 1.29 Euros ("Tourist Rates") or even, 1.34 Euros ("Pound Rates");

* where my US dollar buying is concerned, it seems that a dollar is worth 67p ("Dollar Rates") and that one of my pound coins will buy me $1.46 ("Tourist Rates") or even, $1.50 ("Pound Rates").

Or, um, have I got it all wrong??? (I'm assuming, incidentally, that in an actual exchange transaction, there'd be commission to pay in some way so no, I'd never get the actual sums above but at least, something close to it.)

richardw

Have a play with this https://www.thomasexchangeglobal.co.uk/exchange-rates-currency-calculater.php

How many Euros do you want to buy?

If you are burgled does your insurance cover that amount of cash?

What's the excess on the insurance policy?

How much were you hoping to save?

SW17

hybernia wrote: »

"Currencies" has four different sections: Tourist Rates, Pound Rates, Dollar Rates, and Euro Rates. I've been staring at the figures just now, concentrating only on the currencies we actually buy (the Euro and the US dollar.) Unfortunately, it's become obvious that I really am not bright enough to understand what I'm looking at:eek:.

To be honest, for buying currency for a holiday you are better off ignoring everything except the Tourist Rates. The "Pound", "Dollar" and "Euro" rates mentioned are the currency market "spot" rates used by traders. The only way you will get close to these is with cards like Halifax Clarity, Metro Bank Debit or Kalixa Prepay, which use the MasterCard daily rate (close to spot rate).

The difference between the Tourist rate and the spot rate is part of the profit made by the person selling you that currency. Maybe think of it as like the difference between wholesale and retail prices. They may also charge further commission on top.

hybernia wrote: »

Under "Tourists Rates" a Euro is 1.289 and USD, 1.4625. I presume those amounts are in £sterling, so therefore £1 of my money would buy me 1.29 Euros or $1.46. (Er, am I right?)

You are correct, though the rates in question on the BBC will likely be an average supplied by a financial info service, they will vary slightly for each individual currency vendor.

hybernia wrote: »

Under "Pound Rates", a Euro is 1.3372 and a USD, 1.4995. I'm still presuming the amounts are in £sterling, so therefore £1 of my money will buy me 1.34 Euros or $1.50. (Am I right? But if so, why is my £1 seeming to buy more at this rate than at the tourist rate?????)

Under "Dollar Rates", GBP is 0.6668 and Euro, 0.8917. Assuming that my "home currency" is American, does this mean that one of my dollars would buy me 67p (£GBP) or 89 cents (Euro)?

Under "Euro rates", GBP is 0.7478 and USD, 1.1214. Assuming that my "home currency" is European, does this mean that one of my Euros would buy me 75p (GBP) and $1.12 (USD)????

As explained above, you will not get the "Pound" rate buying currency retail. FYI the spot "pound" rate of EUR 1.3372 is just the inverse of the spot "Euro" rate of GBP 0.7478. If you divide 1 by 0.7478, you get 1.3372. If you tried to buy GBP with EUR as your home currency, you would get a worse rate than 0.7478, you would get the EUR equivalent of Tourist rates.

hybernia wrote: »

To summarise, then:

* where my Euro buying is concerned, it seems that a Euro is worth 75p ("Euro Rates") and that one of my pound coins will buy me 1.29 Euros ("Tourist Rates") or even, 1.34 Euros ("Pound Rates");

* where my US dollar buying is concerned, it seems that a dollar is worth 67p ("Dollar Rates") and that one of my pound coins will buy me $1.46 ("Tourist Rates") or even, $1.50 ("Pound Rates").

Or, um, have I got it all wrong??? (I'm assuming, incidentally, that in an actual exchange transaction, there'd be commission to pay in some way so no, I'd never get the actual sums above but at least, something close to it.)

You are right in theory, but the reality is that you won't ever get anything but a Tourist rate when buying foreign currency in cash.

As to whether you should buy now or later, anyone who knows that (or tells you they do) should be a billionaire. Trying to second-guess the currency markets is a dangerous business. The Euro has weakened this week (good for UK tourists going to Eurozone) due to actions announced by the ECB, but whether it will stay at that level or move in either direction is up in the air. I doubt it will get a lot stronger in the short term, but my guess is just that.

If you want to lock in your costs and buy now, and are happy with the rate you find, go ahead. You may win or lose depending how things move in the next month or two, but I wouldn't waste energy thinking about it after you purchase. However, as richardw points out, if you buy it early and have to cancel the trip for any reason, you would be sitting on a bunch of Euro that you may not be able to use for a while.

Personally, I travel a lot and use the best value credit/debit card I can (one of those I named above) and just accept the best rate available at the time I spend, I don't try to outperform the market.

Voyager2002

Now is a better time to buy than a couple of months ago...

No idea about the future: I do know that if your holiday is next year, you could put the money in a TSB 'Classic' account and it would grow by five per cent before you need it, whereas Euro notes under your bed are unlikely to reproduce.

richardw

I s'pose getting Euros on a pre-paid cash card gets over the risk of having cash in the drawer.

hybernia

Sincere thanks to everyone, and particularly for the "walk through" by SW17 and the section by section clarification: I've heard of something called "spot rates" before but hadn't a clue what it meant! All the advice is greatly valued (at the, um, prevailing rate . . ) I'm thinking we'll be better going the card route and will now investigate the cards kindly identified by SW17.

(By the way, Voyager2002's remark about the procreative inability of Euro notes under the bed is one of the most deliciously droll I've ever read on MSE: wonderful!)

Thanks again to everyone! :T

antenna

Is saturday a better day to withdraw euro cash in spain with a metro card,see below
On Friday i got the mastercard rate 131.397
On Saturday i got 133.362
Today Sunday i got 131.659
I know it does not depend on the day but on the spot rate mastercard use daily
So above for info only.
ps....this is when i select,"your provider will calculate exchange rate"
Not "would you like to complete this tranaction in pounds...(robin b'stards)

callum9999

antenna wrote: »

Is saturday a better day to withdraw euro cash in spain with a metro card,see below
On Friday i got the mastercard rate 131.397
On Saturday i got 133.362
Today Sunday i got 131.659
I know it does not depend on the day but on the spot rate mastercard use daily
So above for info only.
ps....this is when i select,"your provider will calculate exchange rate"
Not "would you like to complete this tranaction in pounds...(robin b'stards)

No, the rate presumably just fluctuated. The Euro has been a bit turbulent recently. There's no logical reason for a special Saturday rate!

zagfles

In summary. Only mugs exchange at "tourist rates". Using a fee free card you get Mastercard/VISA rates which are very close to the "real" interbank rates.

Tourist rates have a large commission built in, even if they claim to be "commission free" (that just means there's no extra charge!).

antenna

zagfles wrote: »

In summary. Only mugs exchange at "tourist rates". Using a fee free card you get Mastercard/VISA rates which are very close to the "real" interbank rates.

Tourist rates have a large commission built in, even if they claim to be "commission free" (that just means there's no extra charge!).

Not that close.........check out the mastercard rate i got on friday saturday and sunday,then check the interbank rate for those three days.....let me know what you find.

zagfles

antenna wrote: »

Not that close.........check out the mastercard rate i got on friday saturday and sunday,then check the interbank rate for those three days.....let me know what you find.

The rate's been volatile. On Thu the mastercard rate was 1.333333, the spot rate was an average of about 1.32 so the mastercard rate was better! It only gets set once a day so it will be subject to daily variations, but on average mastercard rate is very close to the spot rate. Last time I worked it out it was 0.02%

https://forums.moneysavingexpert.com/discussion/4189433