Money Talks Podcast: When to get the best exchange rates for foreign currencies
If you have already made plans to travel, a 2 to 5 per cent change in currency will not significantly impact your spending power.
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If the US dollar weakens against the Singdollar, should you buy it even if you’re not traveling to the US anytime soon? And what happens if the rate drops drastically?
In this week’s Money Talks episode, Khoon Goh, head of Asia research for ANZ gives a run down the basics of currency exchange.
Andrea Heng, host:
One of our guests in a previous Money Talks episode told us that when he saw the Japanese yen dropping, he immediately went and changed a large sum of money and kept it in his multi-currency app. What are the pros and cons of doing this?
Khoon Goh, head of Asia research for ANZ:
It makes sense to look at a very favourable rate, particularly if a trip is coming up, and you know you're going to utilise that. So it makes sense to convert ... But the downside is that potentially that rate could get even better.
Secondly, in terms of these multi-currency wallets, bear in mind you're not actually earning any interest when you convert into it. If you still retain your Sing dollars in your savings account, at least you're earning something, not much, but at least something.
So there is that opportunity cost of lost interest that has to be borne. It's not going to be a large amount obviously, but it's really around the potential for the rates getting better. So if you're converting, say, the whole amount, then you're missing out on any potential better rates.
But on the other hand, it could also revert, and therefore in my mind, let's not have any regrets, because whatever rate that you are changing is obviously a rate that you're happy with, and you're going to spend that amount anyway.
Andrea:
But that's the thing, right? I've always often wondered, when do you know it's a good time to change? Is it when everyone goes: “Hey, the US dollar has come down. I think better change now.” Or is there something that we can refer to as a gauge?
Khoon:
There's a lot of things that affect currency movements, but if you're already committed, or you've already made a decision to travel or go on a holiday to a certain destination, then even a two to five per cent currency move is not going to be material.
