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Many people have asked me recently if now would be a good time for them to travel overseas, due to the strong Australian Dollar. I’m not a travel agent, but in terms of foreign exchange, now is as good a time as we have seen in the last twenty years for converting hard earned Australian Dollars into holiday spending money.
The Australian Dollar is currently trading at or around historical highs against many of the major currencies. Let’s take a look at some of the charts of the Australian Dollar against the currencies of some popular travel destinations.
In Chart 1 below, we can see that one Australian Dollar buys around $US1.05, currently an all time high since the Australian Dollar floated. The chart I am using is FXADUS in ProfitSource software. Chart 1
click to enlarge
$10,000 Australian Dollars would buy you around $US10500. Compare this to October 2008, when $10,000 Australian Dollars only bought $US6000, or even to 2001, when $10,000 Australian Dollars bought less than $US5000, and you can see the potential opportunities there.
In the medium term, I think the Australian Dollar can climb to $US1.20, however we have seen in the past that when the Australian Dollar falls, it has the potential to drop like a stone. In 2008 during the global financial crisis, the Aussie Dollar fell 35 cents in the space of around three months.
In Chart 2 below, we can see that one Australian Dollar buys around 0.65 British Pounds (FXADBP in ProfitSource software).
Chart 2
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I am travelling back to England in May for a holiday and am very pleased with the amount of Pounds my Australian Dollars have bought!
In Chart 3, we can see that one Australian Dollar buys around 72 Euro cents, up around the All Time High since the Euro began in 1999. Chart 3
click to enlarge
The Japanese Yen and the Swiss Franc show a slightly different story, with one Australian Dollar buying 90 Yen compared to the 1991 highs around 1.10, and around 0.95 Swiss Francs, compared with 1.19 in 1992.
On the whole however, the Australian Dollar is looking strong. For those who are holding out for $1.10 before they convert their currency, keep in mind that $1.05 is a lot better than the $0.60 that we saw only two and a half years ago and that the Australian Dollar, while strong and popular at the moment, will pullback at some stage.
Sometimes we need to take an “enough is enough” approach when dealing with financial markets, being thankful that prices are in our favour and not holding out for the last few cents of profit.
Be Prepared!
Mathew Barnes
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