How to lock in euro rate for future travel

[papadad111]

Why not short the DB currency euro ETF. Close out your position ahead of travel.

 

[MichaelB]

I am very comfortable dealing with currency and exchange rate aspects of investing in our portfolio. My question is related to non-investment "1099 free" personal spending.

As Alan points out, a foreign bank account involves FATCA, so it's not an option for us.

Gumby raises an interesting question about tax. I know that exchange transactions for personal use are only taxable when the gain exceeds $300 (per transaction), I believe (but would need to confirm) that translation gains are not deemed income when the currency is held for personal use. The problem with Everbank is, by design, it is 2 transactions (buying, then selling), so it gives me revalued $$ along with a 1099. It's still an option, though.

I've looked around for prepaid Euro debit cards. They do exist, but the fees are very high. Travelex (here) seems very popular around the travel forums, no ATM fees, but they charge 5.5% for the currency exchange. At that rate I'd rather just buy and hold the cash. Prepaid Euro debit cards seem very popular in England. I'll keep looking.

 

[audreyh1]

So, MichaelB - what about using the FXE etf? Seems like the issue would only be capital gains (or losses) realized when selling - i.e. converting back to USD.

Travelex is horrible. 5.5% is as bad as ordering Euros from Bank of America.

 

[MichaelB]

So, MichaelB - what about using the FXE etf? Seems like the issue would only be capital gains (or losses) realized when selling - i.e. converting back to USD.

The gain is a big issue, but not a showstopper, and as you point out, it could be a loss, which other options don't offer. FXE tracks nicely, "only" charges .4%, doesn't throw off any taxable income. It's an option, definitely.

 

[audreyh1]

The gain is a big issue, but not a showstopper, and as you point out, it could be a loss, which other options don't offer. FXE tracks nicely, "only" charges .4%, doesn't throw off any taxable income. It's an option, definitely.

Until the tax, which is only on the gain, exceeds say 5.1% of the total initial investment, you are ahead.

 

[NW-Bound]

Being a bargain hunter, I am interested in FXE, Europe travel or not. However, as I am also a market timer, I am going to wait and watch it.

By the way, FXE used to throw off a bit of dividends but has not in a while. Talk about squeezing blood off turnip when the Eurozone is in deflation and central banks are charging negative interest rates.

 

[FUEGO]

I would go to my credit union and buy euros (at near spot prices) and hold the physical currency. I would lose out on about 0.5% interest after taxes, but any gains in the forex would also be tax free.

 

[eta2020]

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 $

I have relatively large account in EU and I am not a resident of any EU country.

Personally even though we spend 6-7 weeks a year in Europe I don't care if Euro is 1 USD or 1.5 USD. But I would care if buying 150k property

Maybe I would care more if spending 5 months a year in Europe....

 

[Alan]

I have relatively large account in EU and I am not a resident of any EU country.

I am in the same situation, never been resident in any EU country since 1987 but I opened my bank account before the recent FATCA regulations came into effect. I really do think it will be very difficult these days to open an account in an EU country if you are a US resident.

 

[audreyh1]

I would go to my credit union and buy euros (at near spot prices) and hold the physical currency. I would lose out on about 0.5% interest after taxes, but any gains in the forex would also be tax free.

I wish that were an option for me. I'd so do it!

Or at least I'd get cash before a trip.

 

[Totoro]

You should be able to open up a euro account with your bank, and just transfer whatever USD you want to that account. No need to open up a account in a foreign country.

Not all banks support it though (typically discount/on-line banks don't).

Both my broker and bank support USD accounts for example (I live in the eurozone) - broker does it for free, local bank charges 50$ a year or so to maintain the account.

[Edit: found this one, maybe check it out? https://www.everbank.com/currencies/access-deposit]

 

[NW-Bound]

Being a bargain hunter, I am interested in FXE, Europe travel or not. However, as I am also a market timer, I am going to wait and watch it.

By the way, FXE used to throw off a bit of dividends but has not in a while. Talk about squeezing blood off turnip when the Eurozone is in deflation and central banks are charging negative interest rates.

The euro is now up to US$1.14, and it was at $1.05. That's 9% rise. Well, I miss the boat, lousy market timer that I am.

 

[audreyh1]

Yeah - darn it! And we leave for France soon. Stay down, stay down Euro!!!!

 

[Drake3287]

I'm in the same boat, leaving in September so I have a little time to wait it out. Big gamble of when to purchase Euros, and yes I might be to late! Last October when we went the rate was something like 1.33.

 

[Totoro]

This exchange rate dance this year is getting hard to keep track of for me, especially with the stock market doing its thing as well.

Depending on accounting in USD or EUR I had a stellar or an ok year so far.

In addition, currently have expenses in EUR yet am thinking about moving outside the eurozone in the mid-term.

Best case scenario for me is for the NZD/EUR to drop quickly, I'm planning to go there in December or January

 

[rodi]

Yeah - darn it! And we leave for France soon. Stay down, stay down Euro!!!!

I agree! Darn it.

We head out in a month - and have a whole bunch of "balances due" on lodgings in the next 4-6 weeks. I'd love to see it down to 1.05ish again.

 

[audreyh1]

Well the Euro backed off a little today.

I'd be happy enough with around 1.10 and I hope it heads back down there. Just don't want to see it creep much higher.

 

[audreyh1]

Big drop in the Euro yesterday and today. Knock on wood! (I don't want to jinx anything.)

 

[Lsbcal]

If the Euro rises against the dollar our International stocks will benefit more then the extra cost of our September Europe trip. So I'm not worried either way. Bought back our International allocation May 1, so the currency worked in our favor (this time).

 

[audreyh1]

If the Euro rises against the dollar our International stocks will benefit more then the extra cost of our September Europe trip. So I'm not worried either way. Bought back our International allocation May 1, so the currency worked in our favor (this time).

It's just the timing though. I won't be selling any of my foreign holdings over the next month. I don't mind if they temporarily drop while I enjoy lower exchange rate during my Europe travels.

I rebalanced adding to my international mutual funds at the beginning of the year, after the tough 2014. And they are my strongest performers YTD in spite of the strong dollar!

 

[Lsbcal]

It's just the timing though. I won't be selling any of my foreign holdings over the next month. I don't mind if they temporarily drop while I enjoy lower exchange rate during my Europe travels.

I rebalanced adding to my international mutual funds at the beginning of the year, after the tough 2014. And they are my strongest performers YTD in spite of the strong dollar!

OK, I'll dial in a brief Euro decline just for you! Enjoy your trip.

 

[audreyh1]

OK, I'll dial in a brief Euro decline just for you! Enjoy your trip.

Oh, thank you! Much appreciated!!!

 

[gerntz]

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?

This puzzles me. If you buy your plane tickets, pre-pay hotels & trains & get US $ rate on rental car, all you haven't locked in is food & some tours - many of which can be pre-paid. Net, I don't see the issue.

 

[audreyh1]

This puzzles me. If you buy your plane tickets, pre-pay hotels & trains & get US $ rate on rental car, all you haven't locked in is food & some tours - many of which can be pre-paid. Net, I don't see the issue.

I don't think his plans are specific enough to pre-pay for stuff.

 

[gerntz]

I don't think his plans are specific enough to pre-pay for stuff.

OK. But then why/how can you be so specific of locking in exchange on a non-specific trip?