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Non-technical question here, hope that's alright.

I'm planning on spending next Fall abroad in Europe and want to capitalize on the low Euro now. Where/what is the best form to purchase Euros? First consideration was to simply exchange at my bank, but they want 1.30 for every dollar, which is more than 7 cents above the Euro's real value.

Since I don't need cash in hand for at least another 3 months, I'm wondering how I could go about purchasing the Euro at a more economical rate. I know next to nothing about currency trading, but very willing to learn.

As a side note, what do people make of the current drop in the Euro? My intuitions tell me it will be higher, though probably not substantially, by the Autumn. One article I read noted that after the last two times the Euro fell this low, it went on a 6 month rebound. But if the Greek situation continues to spiral out of control, it could fall below 1.2, but I'm not willing to bet on it.

Thanks.

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Comments (13)

  • ibhopeful532's picture

    The primary concern is that the Greek sovereign debt crisis will ripple across the PIGS (Portugal, Italy, Greece, Spain). Italy, Germany, and Spain are already showing signs of financial tightening, which may ultimately lead to even further collapse of the Euro.

    Fyi, a reasonable number of analysts are calling for the Euro and Dollar to be on par sometime in the near-medium term future. On a sidenote, if you have access, buy some RMB's. Expected to be revalued upwards 2-3% in the very near term.

  • Affirmative_Action_Walrus's picture

    The best thing for you to do would be to just use a credit card/debit card for as many purchases as possible when in europe. I'm not sure, but I think your bank/credit card company will convert the purchase back to dollars at the prevailing market rate or at a rate very close to it.

  • Charlie Sheen's picture

    The $1.30 rate isn't as inflated as you think. The $1.23 rate you see on WSJ.com is the rate that banks charge other banks for huge multimillion unit transactions. Sure, there might be a slight lag (depending on how often banks update the rates for exchange purposes), but I think banks typically offer pretty competitive consumer rates.

  • AspiringBanker21's picture

    fyi

    I'm going to London for a summer program and went to my bank last week to see how things would work out. I have a checking account with Wachovia and, although you can withdraw at the prevailing rate, their policy is a $5 surcharge along with 30% of whatever you withdraw.

    Also, make sure you let your credit/debit card issuer know your going to be in another country or they may assume the card information has be stolen.

  • Affirmative_Action_Walrus's picture

    hmm

    i went to madrid a couple of years ago, used my debit card for almost everything, and I want to say that all of my transactions cleared at the prevailing market rate (or something awfully close). I had State Farm Bank at the time btw.

  • ibhopeful532's picture

    For Chase, there is a 3% transaction fee when swiping abroad.

  • Edmundo Braverman's picture

    CC's clear at the market rate but some banks tack on fees. I know in the case of Chase it's market rate+3%+$3 fee. If you really think the Euro is going higher, I'm almost certain you can put a bunch on money in a PayPal account and immediately convert it to Euros (and several other currencies). If you're right, you'll be able to convert it back before your trip for a profit.

    There's no way on Earth I would be buying Euros right now, though. I think parity is the play.

  • In reply to ibhopeful532
    drexelalum11's picture

    If you will be in Europe for an extended period, if you open a bank abroad the international money transfer rate should be pretty close to the quote - looking at a recent confirmation from my bank, the rate they gave me for an international transfer was $00.015 off the market rate for that day. That assumes you're transferring a decent amount, but if you're abroad for a whole semester, it should be enough to get a good rate. I think my bank's fee for that is $30 per transfer.

    Further, if you buy Euros in the US, not only will you get hosed on the FX rate, you're not really going to have any way to get them to Europe - you can't exactly fly in with EU10k in your pocket.

    ibhopeful532:
    The primary concern is that the Greek sovereign debt crisis will ripple across the PIGS (Portugal, Italy, Greece, Spain). Italy, Germany, and Spain are already showing signs of financial tightening, which may ultimately lead to even further collapse of the Euro.

    Fyi, a reasonable number of analysts are calling for the Euro and Dollar to be on par sometime in the near-medium term future. On a sidenote, if you have access, buy some RMB's. Expected to be revalued upwards 2-3% in the very near term.

    BNP Paribas is the only bank projecting parity. Further, as the euro loses value, the chances of China devaluing in the short-term diminish markedly. You have to decide which of your two theses you support; they're mutually incongruous.

  • islandoffmorocco's picture

    i agree with affirmative on this. i use my debit/credit cards when i travel across borders, especially to the benelux. i can't say i have verified a fair exchange rate to, i dunno, 150 bp, but i have roughly calculated a couple of times, and the conversions were close to the prevailing rates.

  • Affirmative_Action_Walrus's picture

    i actually just checked with state farm bank (i will be traveling to europe for a bit this summer as well), and they do not assess any foreign exchange/transaction fees whatsoever on purchases made with their debit/credit cards.
    so, you might want to find a bank with a similar policy (if you plan on going abroad for an extended period)

  • In reply to drexelalum11
    Affirmative_Action_Walrus's picture

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