Exchange Rates

This July I will have the pleasure of travelling overseas and visiting Switzerland, Austria, the Czech Republic, Ireland, England and the United Arab Emirates.

This means I will need to take five different currencies with me. I will need Swiss Francs, Euros, Czech Korunas, British Pounds and UAE Dirhams.

As I am living in Australia, I will need to convert my Australian Dollars into each of these currencies. The strength or weakness of the Australian Dollar plays a big part in how much or how little of each of these currencies I will be able to buy.

Safety in the Market students who have just completed twelve intensive weeks of Ultimate Gann Coaching would know that the Australian Dollar is currently trading at historically high levels. A strong Australian Dollar is good news for Australian travellers heading overseas!

Let’s take a look at an example. Chart 1 below shows the value of the Australian Dollar against the British Pound (FXADBP in ProfitSource). This chart tells you how many Pounds can be bought with one Australian Dollar.

Chart 1

click to enlarge

You can see that one Australian Dollar buys around 60 pence, or just over 0.60 pounds. You can also see that the Australian Dollar is stronger against the Pound than it has been in over 16 years!

Imagine I have 10,000 Australian Dollars that I am planning to convert into British Pounds. I could convert these to around 6000 pounds.

Now compare that with the exchange rates of just over a year ago, when the Australian Dollar only bought 0.40 Pounds in October 2008. In that case, your same 10,000 Australian Dollars would buy only 4000 pounds.

Since most Australians are paid in Australian Dollars and save Australian Dollars, the 10,000 Australian Dollar figure would remain fairly constant. However, you can see that the timing and the exchange rates can play a massive role in travel expenses. I am able to get 50% more Pounds for my money that I would have been able to get a little over a year ago.

Let’s take a look at the Euro. Chart 2 below shows the Australian Dollar against the Euro (FXADEU in ProfitSource)

Chart 2

click to enlarge

Chart 2 shows a similar story to Chart 1 – the Australian Dollar is as strong against the Euro as it has been over the Euro’s ten year history. It is also around 40% stronger than it was a little over a year ago. Again, a good time for Australian travellers to be buying Euros!

Finally, let’s take a look at the Swiss Franc. Chart 3 below shows the value of one Australian Dollar in terms of Swiss Francs (FXADSF in ProfitSource)

Chart 3

click to enlarge

You can see that one Australian Dollar buys around 0.97 Swiss Francs – the two currencies are very close to parity. The difference here is that the Australian Dollar is not at or near major highs against the Swiss Franc, as it is against the Pound and the Euro.

As a traveller, I would look at these charts – especially the Euro and the Pound – and think that now is a great time to travel because the currency is as strong as it has ever been!

As a trader, I am always on the lookout for trading opportunities. Perhaps the Australian Dollar will continue to strengthen and by the time July comes around, today’s rates will look poor.

However, strong bullish runs don’t go on forever and when the Australian Dollar pauses for a correction, I’ll be waiting to pounce. But that won’t stop me locking in some of my foreign exchange rates along the way!

Mathew Barnes