Hedging the volatile Pound

danny1983_2

Hi all,

I want to check if anyone has any better ideas than my current approach. I am off to the USA next April. Between now and then who knows what may happen to the value of the £.

When I am over there I can use the Halifax Clarity which gives the market rate of exchange at the time. Between now and then I am looking to do what I can to protect against a potential drop in the £ and my approach has been loading money onto an FX Dollar card. The rates are pretty good and topping it up regularly evens out fluctuations in the exchange rate.

I am happy that this method means for anything loaded onto the card, i won't benefit if the £ rises against the $.

let me know if anyone has an alternative approach

worldtraveller

As you say, "...who knows what may happen to the value of the £."

Therefore, whatever you do now, in a week, a month, or several months ahead, is a gamble, nothing less!

Personally, if you're happy with the USD/GBP exchange rate now then I'd just settle now and not worry about it.

I've been travelling to the USA on business, regularly, for over 35 years now. You win some, you lose some, there really is no crystal ball! IMHO it's really not worth worrying over.

eDicky

danny1983 wrote: »

my approach has been loading money onto an FX Dollar card. The rates are pretty good

We don't know which card you refer to or what these 'pretty good' rates are, but the cost of buying dollars in this way will tend to offset any advantage. If you want to hedge in this way, consider using Revolut, with which you can convert to dollars at the perfect interbank rate (weekdays) when you choose.

takman

danny1983 wrote: »

Hi all,

I want to check if anyone has any better ideas than my current approach. I am off to the USA next April. Between now and then who knows what may happen to the value of the £.

When I am over there I can use the Halifax Clarity which gives the market rate of exchange at the time. Between now and then I am looking to do what I can to protect against a potential drop in the £ and my approach has been loading money onto an FX Dollar card. The rates are pretty good and topping it up regularly evens out fluctuations in the exchange rate.

I am happy that this method means for anything loaded onto the card, i won't benefit if the £ rises against the $.

let me know if anyone has an alternative approach

The problem with this and any card of this type is there will always be the disadvantage of having your money tied up in dollars so you have to spend a certain amount of money while there or face expensive charges converting it back.
There are usually other fees and poorer exchange rates which cost you more money.

I would always recommend simply using the Halifax Clarity and other cards which offer an almost perfect exchange rate at the time you spend the money.

If you can predict the value of certain currencies over a period of time you would be better of trading on the Forex market as you will be able to make a lot of money!.

Roger1

danny1983 wrote: »

The rates are pretty good and topping it up regularly evens out fluctuations in the exchange rate.

Anybody using this as the basis for exchanging over a period usually ends up sadder and poorer.

While I don't remember the postwar rate of $4 = £1, I do remember as a kid half a crown (= 2 shillings and sixpence = 12.5 pence) being referred to as 'half a dollar'. I'd say that rate would be 'pretty good'.

I do remember when the pound was devalued from $2.80 to $2.40, with the prime minister reassuring us that the pound in our pocket was still worth one pound.

Harrumph! Since then, the value of the pound against the dollar has fallen inexorably to today's miserable level, and similarly against most other convertible currencies.

takman wrote: »

I would always recommend simply using the Halifax Clarity and other cards which offer an almost perfect exchange rate at the time you spend the money.

I agree, and would include the right debit card for cash, in my case the Nationwide FlexPlus Visa debit card.

If you can predict the value of certain currencies over a period of time you would be better of trading on the Forex market as you will be able to make a lot of money!.

Exactly!

Voyager2002

Roger1 wrote: »

Anybody using this as the basis for exchanging over a period usually ends up sadder and poorer.

While I don't remember the postwar rate of $4 = £1, I do remember as a kid half a crown (= 2 shillings and sixpence = 12.5 pence) being referred to as 'half a dollar'. I'd say that rate would be 'pretty good'.

I do remember when the pound was devalued from $2.80 to $2.40, with the prime minister reassuring us that the pound in our pocket was still worth one pound.
!

I also can just about remember when the pound was $2.80 (and also the brief time when it was just over one dollar!). I think the days of the five-shilling dollar lie in the dim and distant past rather than anyone's memory.

Anyway, if you believe that there is a consistent long-term fall in the pound against the dollar then the sensible thing to do would be to convert all your savings into dollars and hope that by the time you need them the increase in the dollar will have been greater than the interest you will have lost by doing this.

photome

takman wrote: »

The problem with this and any card of this type is there will always be the disadvantage of having your money tied up in dollars so you have to spend a certain amount of money while there or face expensive charges converting it back.
There are usually other fees and poorer exchange rates which cost you more money.

I would always recommend simply using the Halifax Clarity and other cards which offer an almost perfect exchange rate at the time you spend the money.

If you can predict the value of certain currencies over a period of time you would be better of trading on the Forex market as you will be able to make a lot of money!.

If using a Revolut there are no expensive charges for changing it back . Not sure what you mean by having to spend a certain amount while there

takman

photome wrote: »

If using a Revolut there are no expensive charges for changing it back . Not sure what you mean by having to spend a certain amount while there

I haven't looked at Revolut specifically so it may be the expectation but all the cards i have seen if you change back and forward between currencies you usually loose something in fees or a poorer exchange rate. So this means that once you top up a card your more likely to spend what is on it instead of changing it back.

But the rest of my post still stands if your changing back and forward between currencies on Revolut to "get the most for your money" then you are effectively trading in forex.

Roger1

Voyager2002 wrote: »

I think the days of the five-shilling dollar lie in the dim and distant past rather than anyone's memory.

Quite right!

Anyway, if you believe that there is a consistent long-term fall in the pound against the dollar then the sensible thing to do would be to convert all your savings into dollars and hope that by the time you need them the increase in the dollar will have been greater than the interest you will have lost by doing this.

In my case, it would have been the Swiss franc. I studied in Switzerland in the 60s and was getting over 11 CHF for a pound. Today, it's around 1.30.

Forgetting (the miserable) interest, capital appreciation alone would have meant (say) £1,000 converted then would be worth about £8,462 now. But I didn't have £1,000 ...

And just to cement my earlier post, that M Barnier said some apparently nice things about Brexit yesterday and the pound strengthened by about 1%, so transfers last week wouldn't have been such a great idea compared with earlier today.

Voyager2002

Roger1 wrote: »

And just to cement my earlier post, that M Barnier said some apparently nice things about Brexit yesterday and the pound strengthened by about 1%, so transfers last week wouldn't have been such a great idea compared with earlier today.

If only I knew what he will say tomorrow!

thrifty_pete

How much are you thinking of spending? It will be more important if you're thinking of spending £10k verses £1k.
Even at £10k a 1% movement is only £100