Buy Dollars

littledre61

We are thinking about buying some US Dollars as an investement. We would be looking to buy £10,000. We know the Dollar may rise and fall but are willing to take this gamble. How do we go about buying the Dollars. We are going to the US in August so we will be needing some anyway.

davetrousers

Compare buying and selling exchange rates before embarking on this!

meester

Madness.

It's not an investment.

What you are talking about is currency speculation.

The cost for you as individual will be 5%+ both ways, which would wipe out much of your profit (if any).

If you really want to do this, there's no reason to actually acquire the currency (expensive), instead you can work on spread bets or get an FX account, such as www.dbfx.com www.fxcm.co.uk etc.

littledre61

So what your saying is if I buy at $1.90 and it falls to $1.75 I will make nothing.

davetrousers

littledre61 wrote: »

So what you're saying is if I buy at $1.90 and it falls to $1.75 I will make nothing.

The rate you buy the currency at is a lot different to what you would sell it back at. Do you think if you buy at $1.90 and the rate stayed exactly the same that they would buy it back at $1.90. Oh no they would probably buy it back at about $2.10 so you would lose money.

If you bought at $1.90 and then the rate fell to $1.75 then they would probably buy it back at about $1.95 so you would lose money.

So you need to be aware of the (general) diffference between the rates that they sell currency to the rate they buy it off you.

Edit: Just looked at post office website: Today, they will sell US dollars at $1.92 but buy back at $2.18. It would have to fall loads to make any money.

happywarmgun

Clearly, it would be madness to buy and sell via a currency exchange booth (either a purpose built one, or one in a bank/travel agent/post office.) The spread would be rubbish. However, if you're shifting a bit of cash (and 10k qualifies) you just use a specialist broker.... google it.

A cut and paste from one return:

"There are usually two different options for buying currency from a broker. The first is a spot contract rate which will get you the best rate and is executed at the moment you give the verbal authority. The second is a forward contract rate, which will require a deposit, where you can choose to buy currency at a specific date or within a certain time period in the future for a pre determined price. This may be the best course of action if you think rates are going down but are not ready to exchange now, but the rate will be lower than the spot rate of the same day. "


A friend of mine has just started a business, and his main supplier is in the US. He used a broker and has locked in a price of $2.07 to the pound at the back end of last year. He's laughing all the way to the bank now every time he draws his option down.

Like everything it's risky - do your reasearch.... where are you going to put your dollars when you have them? If you see some US equities you think are going to increase you are basically making a double bet: 1/ The share movement will be favourable, 2/ The currency movement will be favourable.

If if goes the right way you get a double boost to your return, if it all goes the wrong way you get a double whammy on your loss.

The fine line between whether what you are doing is an investment or outright gamble, will be defined by the amount of research you do yourself....

Good luck.

jzi19

Heres a site that explains forex in something understandable - other sites make the topic so complex. It concentrates mostly on technical analysis but gives you an idea of foreign exchange dealings.

http://www.babypips.com/school/

Browntrout_2

The way to do this might be to open and account with a bank where you can hold deposits in USD get some interest and make withdrawals on holiday at ATMs.

Check what charges and commision rates are though.

http://www.citibank.co.uk/personal/banking/international/currency.htm

spencer24

I don't think the USD has bottomed yet, and I think it will fall further.

Jnelhams

Instead of buying US Dollars as currency, you would do better to buy shares in a large US company (microsoft, bank of america, xerox something like that) or a Investment trust , ETF or Unit Trust investing in US (some ETF's are available priced in Dollars that invest in other countries too).

You could buy sterling priced American investment trusts/etfs/unit trusts and
This way you benefit from any currency gains, and also any investment gains but with out the exchange costs.

BUT THIS IS LONG TERM - just use your Nationwide Credit Card in the USA - No charges, and you get the money market rates !

philadam

I'll agree with others here and say that IMHO, currency speculation at this level is a mugs game.

Phil