Playing with currency £ to € and back

Legacy_user

Hey folks.

Currently have some savings and was thinking of swapping pounds for euros and vice versa when rates fluctuate.

I work in Europe and earn and deal in Euros however I have decent savings in my UK account.

I was thinking of say when the £ to € rate hits say 1.15 transferring a large amount (probably around 5k) then when it drops to 1.12 or so swap back again.

If be using transferwise so the costs aren't too bad.

Like anything it may be a waiting game but it's relatively low risk to make a couple of hundred quid a few times a year.

Anyone else do it or is it too simple to be true.

I have both a European account and British one and regularly move money around though more for bills and stuff than making money.

Baby_Angel

I have transferred some money back and forth when the rates were low through transfer wise. Only because I needed for bills and payments in the respective countries. Not as a way of making any money.

System

Yeah I do it regularly. Basically because I earn in Euros so as the rate favours the move i got euros to pounds. However in the last 3 month's the rate has been anywhere between 1.16 to 1.08 that's a big difference when you would factor in moving say 5k.

Is low risk for a decent reward like. Doing it 3 or 4 times a year could make more than any interest would ever get you.

Just timing I suppose.

System

I mean move money for paying bills and stuff and smaller amounts in reply to the last comment.

Never moved big amounts for making money purposes yet. Seems straightforward.

Thrugelmir

frannyj543 wrote: »

Anyone else do it or is it too simple to be true.

Would you walk into a casino and play black or red?

System

Would I put 5k to either win 10k or 0. No.

But would I risk 5k to either get £5100 or £4900. Yes as I don't have a rush and can be patient and I can afford to lose £100 and put it as a lesson learnt.

I can have the amount sitting a while if needs be. Just seems easy obviously you need patience but it's not like it's something that is all duck or no dinner.

lpgm

It sounds like you've already made your mind up. So go and enjoy yourself.

PeacefulWaters

Check out exchange rate spreads and dealing costs.

Then knock yourself out.

Why restrict yourself to two currencies?

System

Lpgm what a great input. Can you tell me why you felt the need to comment if you werent adding anything worthwhile to the question? Just wanting to pass your time or what?

The reason I'm thinking these 2 currencies is because I have a Spanish bank account, a UK one and I have used transferwise to do £/ € transfers before.

I follow the rate everyday.

Linton

The danger is that you are in the wrong currency at the time of a one-off event causing a loss far higher than the day to day noise you are betting on. I would have thought you could have got a better return for the level of risk you are taking.

So it's OK for a bit of fun that may or may not make you a few £s but not to be recommended as a serious money-making strategy.

verybigchris

Below is a chart showing the historic £/€ rates (hopefully, I can never get images to work on this forum!)



From mid-2003 to late-2007, the rate was pretty stable, typically between 1.43 and 1.46. Someone using a similar strategy to the one you're proposing would have had over four years of profits from buying € every time they hit 1.46 and selling every time they hit 1.43. Sounds pretty good.

But look what happened next. The € dropped below 1.43 in Nov 2007 and never returned. So anyone playing this strategy would have either been stuck with £s for a decade, or been forced to sell them at a significant loss.

It's an economic certainty that the range you pick will not be a permanent equilibrium. Play this game long enough, and you are guaranteed to be left holding over-priced currency.