Saturday, December 29, 2007

An interesting question

The euro is strong against the pound which is why the exchange rate from sterling to euros is poor. From a high of 1.5 euros to the pound, we are now looking at 1.36 euros to the pound. So for every 1,000 GBP you transfer at the moment you'd get 140 euros less than before.

The dollar is weak against the pound which is why you can get 1.99 dollars to the pound.

So if I change sterling to dollars and then dollars to euros would that give me a better deal?

The answer is unfortunately no, unless you keep the dollars until the euro weakens. Go to XE.com and work it out. In theory you'd end up with the same amount whichever way you exchanged your money. In practice you'd loose because there would be charges on each transaction (the difference between the buying and selling rates)

100GBP = 199.989 USD (1GBP = 199.989USD)
199.989USD = 136.115 EUR (1 USD = 0.680642 EUR)

100GBP = 136.115 EUR (1 GBP = 1.36115 EUR)

The smart thing to do is to only change currency when the rate is good.
Some of the people here took advantage of the 1.5 euros to the pound rate and transferred large amounts at that time.

Even if their money had been in an account earning say 5% interest in the UK, they would still be better off by several hundred euros than someone changing money each month over the last year.


The problem is that you'd have needed a crystal ball to work that out and if the rate had remained stable they'd have lost out.

The strength of the euro is a cause for concern, not just for us, but for anyone trying to sell goods from the Eurozone in other markets. The only reason that the European Central Bank is allowing the euro to remain at these levels is to try and curb inflation below the 2% target.


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