Have you ever decided to go on holiday, arrived at the airport to buy your foreign currency and jet off, and thought ‘Woah, that exchange rate is a lot worse than I thought it was. What’s happened since the last time I looked?’
If so, you may be pleased to know that the exchange rate you get isn’t completely in the hands of fate. In fact, if you just learn a little bit about what makes the rates change, and when is the best time to buy currency, you stand a much higher chance of getting a good rate.
So what can you do to get a good rate? Well, that’s what I want to look at in this post.
1. Look for good news for the currency you want to sell.
This means, if you want to sell US dollars to buy euros for example, look out for economic news that will make the greenback rise. This is because, the higher the US dollar rises, the bigger the euro total you’ll finally get.
So what kind of news makes a currency rise? Well, if that country’s economy is doing well, that will generally make the currency rise. For instance, you might open the newspaper one morning, to read that the US economy has expanded 2.0% in the last three months, or that retail sales are up.
If so, these are exactly the kind of things that will benefit a currency. Then, it’s just a matter of calling a bureaux de change, finding out how much the dollar is up and, if you’re happy, making the exchange there and then.
2. Look for bad news for the currency you want to buy.
Conversely, if you want good news to make the currency you want to sell stronger, you also want bad news to make the currency you want to buy weaker. So let’s say you want to exchange US dollars for euros again. What would benefit your exchange rate in this case?
Well, you might hear on the radio that Greece has defaulted on its debts for instance, or that the Eurozone has entered recession. In either case, that’s likely to cause a lot of anxiety in Europe, and cause the euro to weaken. Which is exactly what you want if you’re buying it.
Then, it’s once again just a matter of heading to a bureaux de change as soon as possible, and taking advantage of that euro weakness. The quicker you act, the more likely you are to benefit, before the mood on the foreign exchange market changes (unfortunately, it’s extremely volatile.)
3. Do all this at the earliest opportunity.
One of the biggest mistakes people make when changing currency is to wait until the last minute, when they’re at the airport. Then, they’ve no choice but to accept whatever exchange rate’s available, because they’re due to fly in a matter of hours. They’ve given themselves no alternative.
If on the other hand you do as I’ve suggested, you’re much more likely to be engaged with the exchange rates early, and know how they’re doing from week to week. If you do this, you stand a much better chance of being able to choose when you change currencies, and end up with a good rate.
Hence, above all else, start looking at the exchange rates early, to give yourself the biggest possible window to maximise your rate. Depending on how much you’re exchanging, and how volatile the rates are, it could be a matter of hundreds of dollars or euros.