How to lock in euro rate for future travel

[MichaelB]

The US$ sure is on a tear, and probably has a bit more room to rise against the Euro. Parity approaches. All good things come to an end, however, and that rate will not remain forever. I'd like to lock it in for future travel plans, say a year or so from now. What is the best way to exchange a couple of $K into Euros for this purpose? Everbank sells 12 month Euro CDs, but their fees and exchange rates aren't clear, and the currency gain would be taxable income. I'm wondering if there is a way to lock in the rate now, and be able to use it in some future date without any future need to reconvert. Pre-paid debit cards, perhaps?

 

[braumeister]

Why not just buy Euros and hold the cash?
That's what I plan to do.

 

[rodi]

Depending on the Euro rate when we're there this summer - we may be bringing more cash home than we have to.... for future trips.

 

[2B]

I've see the euro in the 0.8 to 0.9 range. Be careful about having recent exchange rates lead you to putting a lot of cash into euros. Buying a little ahead won't hurt. I usually keep 50 to 100 euros to get me from the airport to my first hotel/B&B.

 

[Sunset]

Unless you are going to use it the following year, I would think some investment would be best as otherwise inflation will eat up 3% of it per year.

And if you are planning to visit Greece, the Eur might not work there in a few years

Let us know if you find a good unhedged investment in Euro's. Although when I say it that way we are really talking currency trading, which is supposed to be risky.. ?

 

[Fermion]

Can you buy Amazon gift cards in a European country? Amazon.eu France maybe?

Qui!

https://www.amazon.fr/gp/product/B0...=gift cards&qid=1426286108&ref_=sr_1_1&sr=8-1

Now let me try to figure out how that could help...

 

[audreyh1]

Travel this year.

I had some charges post today. 1.07 dollars to Euro.

I'm paying for my train tickets next week.

Otherwise I would just buy some Euros and hold onto them.

It might take years to reverse - you never know.

 

[NW-Bound]

I've see the euro in the 0.8 to 0.9 range...

That's a long time ago, about 1999-2000. In all our trips to Europe in the 2000s, we were paying more than 1.2 US/Euro, and one time more than $1.35 US/Euro if my memory serves.

 

[audreyh1]

Unless you are going to use it the following year, I would think some investment would be best as otherwise inflation will eat up 3% of it per year.

And if you are planning to visit Greece, the Eur might not work there in a few years

Let us know if you find a good unhedged investment in Euro's. Although when I say it that way we are really talking currency trading, which is supposed to be risky.. ?

Inflation? 3% per year?

 

[Sunset]

Inflation? 3% per year.

Hotel inflation, as the lower rate will cause a rise in tourism, and where the crowds are the prices rise higher than everywhere else.

 

[audreyh1]

Hotel inflation, as the lower rate will cause a rise in tourism, and where the crowds are the prices rise higher than everywhere else.

We'll see. Europe is really struggling with deflation right now.

If lower exchange rates (easier on exporters) and increased tourism jump starts the European economy, it will be better for all of us.

But I never understood the old ~1.4 relationship between the Euro and USD anyway.

 

[MichaelB]

Why not just buy Euros and hold the cash?
That's what I plan to do.

This will be my fall back plan.

 

[MichaelB]

Unless you are going to use it the following year, I would think some investment would be best as otherwise inflation will eat up 3% of it per year.

And if you are planning to visit Greece, the Eur might not work there in a few years

Let us know if you find a good unhedged investment in Euro's. Although when I say it that way we are really talking currency trading, which is supposed to be risky.. ?

I agree with Audrey, European inflation is not a major concern right now. Even if it does happen, buying Euros now or later will not affect that, it would only be a reason to travel sooner.

Euro fixed income investments should be easy to find, but that's not what I'm looking for. Investing means there would be future income and capital gain that is taxable income.

 

[Davis65]

HSBC bank offers euro accounts in Canada. I would be surprised if it doesn't in the US.

 

[Gumby]

It has been about ten years, but when I was buying Brazilian Real denominated CDs from Everbank, I don't recall there being a fee. And I think the exchange rate was close to spot, although I'm sure there was a markup of some bps. I think the currency gain is technically taxable no matter how you do this; it's just that Everbank reports to the IRS.***

Personally, I usually come home with a few hundred Euros which, like 2B, I use the next year to get me from the airport to my hotel. This year, I might bring home a larger amount than normal.

**** Edit to add - After more reflection, if you just spend your euros and never convert back to dollars, there may be no taxable gain.

 

[audreyh1]

This will be my fall back plan.

The only thing is I don't know how to buy Euros in the US without a poor exchange rate. I can order Euros from Bank of America with "no fees" but their poor exchange rate on the service corresponds to a 5.5% spread!

When overseas, withdrawing Euros from an ATM costs me at most 1% in foreign exchange fees, and using a credt card costs me 0%.

So I guess you have to decide when the spread is worth it.

Someone who has a European bank account, no problem.

 

[eta2020]

Goldman Sachs Has Just Gone Super-Bear on the Euro - MoneyBeat - WSJ

Most analysts expect Euro to drop all the way to 80-85 cents by 2017. It looks highly probable that Euro is going down and will continue going down for some time.

I am not sure how much difference it makes for few thousand dollar vacation but if one wants to buy vacation property in EU then timing can make a lot of difference.

BTW nothing stops you from opening bank account in for example Spain and wiring money from US into that account.

 

[audreyh1]

Interesting.

Goldman, which like others has been scambling to keep up with the euro slide, lowered its forecasts for the euro Friday to $0.95 in 12 months, $0.85 by the end-2016 and $0.80 for the end-2017. The previous forecasts were 1.08, 1.00 and 0.90 respectively. It has predicted that the euro would rise against the dollar until last April.

I don't know what Goldman Sach's track record is. I do know they make a lot of bold predictions (and grab headlines).

It's certainly sweet as a tourist. Last year I was paying around 1.30 USD per Euro, even though that had dropped from about 1.4 a few months before my trip. The drop now to well under 1.1 is quite significant on my charges!

Every 5% discount is quite noticeable!

 

[Gumby]

Since we're going to Italy next month, I'm quite happy about this situation.

 

[audreyh1]

Ah - here you go: Top 7 EUR (Euro) ETFs

Now I understand why some M* posters keep mumbling about FXE!

Hey - open a Charles Schwab brokerage account (min $1000). Invest in FXE commision free when you think it's a good time. Open their Investor Checking, and enjoy 0% transaction fee ATM withdrawals when you are in Europe!

Personally I think the Euro dropping against USD is a multi year trend.

 

[MichaelB]

Like every other financial institution, the GS projection is sell-side recency, just projecting into the future the past few months. Here's what they said about the Euro 6 months ago U.S. Dollar Will Achieve Parity With Euro by 2017, Says Goldman - MoneyBeat - WSJ

The euro is on its way to parity with the dollar by the end of 2017, say analysts at Goldman Sachs Group Inc
./.
In six months, Goldman predicts the euro will drop to $1.25. In 12 months, it will be at $1.20. The single currency should hit $1.15 by the end of 2015, and $1.05 one year later. By 2017, the euro will hit parity for the first time since 2002, the year it entered circulation as a physical currency.

Future exchange rates are unknown and cannot be predicted. My experience, from living abroad almost half my life: if you know you have a future need in a specific currency, and you find an opportunity to get the currency at a "good" price, then buy it, then forget about it, you now have one less worry. Trying to get the "best price" isn't worth the effort, you will only waste countless hours of your life trying, worrying and stressing.

 

[audreyh1]

Like every other financial institution, the GS projection is sell-side recency, just projecting into the future the past few months. Here's what they said about the Euro 6 months ago U.S. Dollar Will Achieve Parity With Euro by 2017, Says Goldman - MoneyBeat - WSJ
Future exchange rates are unknown and cannot be predicted. My experience, from living abroad almost half my life: if you know you have a future need in a specific currency, and you find an opportunity to get the currency at a "good" price, then buy it, then forget about it, you now have one less worry. Trying to get the "best price" isn't worth the effort, you will only waste countless hours of your life trying, worrying and stressing.

FXE then. That looks to be the cleanest option by far.

 

[Alan]

BTW nothing stops you from opening bank account in for example Spain and wiring money from US into that account.

Spain may be different but since FATCA came into force it is usually very difficult for US citizens without residence in the foreign country to open foreign bank accounts since the banks don't want to deal with all the extra reporting requirements.

ETA
I have a UK bank account and just transferred some money there for our trip next year as the pound is also very low against the $

 

[Chuckanut]

We'll see. Europe is really struggling with deflation right now.

If lower exchange rates (easier on exporters) and increased tourism jump starts the European economy, it will be better for all of us.

But I never understood the old ~1.4 relationship between the Euro and USD anyway.

IIRC, the euro was about $1.16 when it first started being used.

 

[audreyh1]

It went to parity for a while too.