Getting to Europe – 22% Off
Do you know what the Forex is? Forex is a shortened abbreviation of Foreign Exchange. You probably know that currencies trade in the open market and that you can buy and sell currencies of different countries like you do stocks that trade on the New York Stock Exchange or on the Over-The-Counter (OTC) or NASDAQ market.
You probably already know that there are 27 countries in the European Union and of these 27 countries, 20 have adopted the Euro as their official currency. In this discussion I will use the symbol $ to represent the United States Dollar (USD) and the € sign to represent the European Union (Euro).
You should know something about what I call the USD to Euro parity. Parity between the $ and the € occurs when they are both at a 1 to 1 ratio. So if you have one $1 it can be exchanged for €1. This would be in a perfect world, like it was back in 2002; for example.
Let’s put this into perspective so you can see what I am talking about. About 1 year ago, in November, 2007 it took about $1.45 to equal €1. In January the ratio was $1.47 to €1. If you fast forward to July, 2008 the ratio was $1.59 to €1. As you can see you are paying more and more US $ to get €1. So if you travelled to Europe last July you got a poor rate of exchange when you traded your USD into Euro.
Wouldn’t it be nice to be able to buy your currency now and then when you took your European vacation in July 2009, you did not have to worry about the rate of exchange, since you already had your Euros. You have that opportunity right now. As of last week on November 12, 2008 the rate of exchange was $1.24 to €1.
As you can see the current rate is not $1 to €1 that it was in 2002. But you will have to admit that it is better now than it was in July, 2008. The risk you have is, “Will the dollar increase in value compared to the Euro between now and next July, 2009?” That is, will the number of USD go down in relation to the number of € it buys? Something else you have to ask yourself is, “Will the 20 countries that use the € as their currency get their economies back into shape before the US?”
My crystal ball has not been working for a while, but I would have to say that I think that trading USD today into Euros is a risk worth taking. $1.24 now compared to $1.59 last July is a savings of 22%. So by getting your Euros now compared to last July you are saving 22% on your trip.
The next question becomes where do you get €? Most large national banks like Well Fargo or Chase have International currency windows on their teller lines in the larger branch offices. The Wells Fargo office downtown where I live has two international currency tellers.
You can use this same technique for other currencies like the Australian or Canadian Dollar. The rates of exchange are available online at many web sites. Google for Currency Rates and you will get the current rates of exchange as of the previous day’s close.
I would suggest doing some previous study on how the rates compared over the past couple of years to get a feel for how the two markets have compared, before runnning out and trading your $ for €.
Until next time, let me know what is on your mind, and how you are doing, O.K.?
You can send me your questions or comments on my bio page. My next article will be out shortly.
Jim Fortune - the BellaOnline Budget Travel Guy
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