Euro to Dollar : Get The Best Rates!
Where you go to exchange your currency can make a huge difference on
the
Euro to dollar rate that you finally achieve. I have detailed some of
the best and worst examples below which I hope will illustrate the
point. When it comes to currency exchange it pays to shop around!!
In addition I have also explained some of the ways to hedge your risk when buying, and also how to buy, when you actually need the currency - so hopefully you not only exchange at a good rate, but also at the right time!
Euro to Dollar : The Worst Exchange Rates
Top
of the list for the worst exchange rates when travelling are hotels,
airports and foreign banks. In short, anywhere you are a captive market
will cost you, and this includes credit cards and banks ( see below) Now you might say that losing a few dollars
hear and there when travelling is all part of the cost. Personally, I
prefer to get the best rates possible, and if that means a little bit of
planning - so be it! Naturally small differences in rates are not going
to break the bank when talking of a few hundred dollars or euros - but
money is money and your holiday or business spending can cost you.
Retail currency exchange is a licence for the banks to print money, with foreign loadings, transaction fees and commissions just some of the extra charges. Suppose you withdrew $1000 dollars from a cash point abroad with your credit card - you would pay a 2-3% foreign loading fee, and a 2-3% withdrawal fee. In addition the interest rate you would be charged would be around 20%, with no interest-free period! Total cost would be approx. 80 to 90 dollars - getting on for 10%!!! I work hard for my money and would prefer not to give it to the bank or credit card company if possible
Now, my next pet hates are your local banks. If you are buying a major asset overseas, please, please, please, do not use your local bank for currency exchange. Not only will they offer you very unfavourable rates, they will also charge commissions. Currency services for them are not a mainstream business, and therefore this area of their business is often a loss leader - hence the rates are uncompetitive and charges are excessive -please stay away. So where do you go to get the best Euro to dollar rates?
Euro to Dollar : The Best Exchange Rates
The simple answer is to look online - there are many currency exchange specialists who will offer you the best rates available, and certainly better than a high street bank ( I told you they were a pet hate of mine ) As a general rule of thumb, a high street bank in Europe, will charge you on average 4% to 5% more than if you use a specialist currency broker. So if you are buying that overseas property for $500,000 dollars, this could cost you an extra $ 25,000. In addition you will also find the banks will charge you for electronic transfer of funds, along with commission. I hope I have made the point.
An online broker such as HiFX will give you very competitive rates, which are very close to the current market rates. As an example the Sunday Times on the 16th September 2007 here in the UK, recently compared several providers based on a 200,000 Euro conversion from UK pounds.
| Provider | Rate | Cost |
| Foreign Currency Direct | 1.4538 | 137,570 |
| Moneycorp | 1.4520 | 137,741 |
| LLoyds TSB | 1.4344 | 139,431 |
| Barclays Bank | 1.4303 | 139,831 |
| HSBC | 1.4293 | 139,929 |
| Halifax | 1.3944 | 143,431 |
| Nat West Bank | 1.3932 | 143,554 |
As you can see from the above, there is a spread of 8,000 euros, $12,000 ( 6000 pounds) between the cheapest and the most expensive, just to exchange your money! And this is before the banks add on all their charges for transfers and commissions.
As a general rule, the exchange brokers charge no commission and no fees - So how do they make their money? The simple answer is that they make their profit from the spread between buying and selling, in much the same way as a forex broker. All currency exchange pairs have a spread price in the market - a buy price and a sell price. The broker's profit is the difference between the two prices.
OK, now let's look at how to manage your currency on the Euro to dollar exchange risk using various order types.