Traveling to Europe,should i hedge?

Discussion in 'Forex' started by skibumm101, Jul 27, 2008.

  1. Ok, so here is a totally random thought, haven't full thought it out, but wanted to know if this makes sense.

    I will be traveling to Europe in apx. 6 months, and most of the time will be spent in Countries that use the Euro. My personal sentiment is that the EUR/USD will continue to rise over the next 6 months making my poor US dollar weaker then it already is.

    so here is the question.

    Should i convert what i will be spending into Euros, and hedge the same amount with a long EUR/USD? If the dollar keeps falling(as i predict) then i will have "exchanged" my vacation money at a great rate. If the Dollar does gain some momentum, i will be out of savings, but not out anymore then what i was budgeting for this trip.

  2. Surdo


    How long are you going for?
    You are talking about peanuts here if this is a one month vacation. The difference between 1.5700 and 1.6000 on USD5,000 is a whopping $98 (less commission), is it worth going at risk?
    Go on VACATION!

    el surdo
  3. thanks, not to be pompus, but traveling with seven for a little over a month doing the "Dream" vacation(at least in my families eyes) does have a certain expense, but i haven't looked at real numbers to see if it is even worth the trouble.

  4. Surdo


    I was not trying to be a wiseass, do the math, you get hammered on commission, so you mine as well not worry about it, and enjoy your European Vacation with the Griswolds!
  5. I think the Euro is already close to it's peak, I doubt there's much risk of it going a lot higher right now. Check out the "Big Mac Index" and you'll see how overvalued the Euro is right now:

    I think the bigger thing to worry about if you have to exchange a signifigant amount of money would be the spread. Typically any bank or credit card company will take about a 2.5% cut when you exchange currencies. So if you have to exchange $20,000 for your vacation, you'll lose $500. I've heard that this is one of the biggest money makers for banks.

    For any amount over $1000, I'll use my Interactive Brokers account to make the exchange. For instance if I exchange $1000 CDN to US $, at the bank or with my credit card it will cost me about $25, through Interactive Brokers, with spread and commission, it costs me somewhere around $5.

    I have only done this with American and Canadian dollars. Later this year I have to exchange a large amount of Euros to Canadian or American Dollars, I'm not sure yet if I can use my broker to do this. Let me know if you find an inexpensive way to exchange Euros.
  6. Bowgett


    Buy half euros you are going to need. In case euro rises you already bought it at a good price and if it falls you are going to buy second part at a good price.
  7. Yea, you should, LMAO at you for asking such a stupiid ???
  8. Why tie up your money for 6 months in Euros that might just as well go down instead of up. If you have $20,000 to spare, why not invest it in something that is more likely than Euros to go up 10 or 20% in six months.
  9. Just curious, did you buy Euros or not? The American dollar has gone up about 5% in the last week.