Traveling to Europe,should i hedge?

S

skibumm101

Ok, so here is a totally random thought, haven't full thought it out, but wanted to know if this makes sense.

I will be traveling to Europe in apx. 6 months, and most of the time will be spent in Countries that use the Euro. My personal sentiment is that the EUR/USD will continue to rise over the next 6 months making my poor US dollar weaker then it already is.

so here is the question.

Should i convert what i will be spending into Euros, and hedge the same amount with a long EUR/USD? If the dollar keeps falling(as i predict) then i will have "exchanged" my vacation money at a great rate. If the Dollar does gain some momentum, i will be out of savings, but not out anymore then what i was budgeting for this trip.

Thoughts?
 
How long are you going for?
You are talking about peanuts here if this is a one month vacation. The difference between 1.5700 and 1.6000 on USD5,000 is a whopping $98 (less commission), is it worth going at risk?
Go on VACATION!

el surdo
 
thanks, not to be pompus, but traveling with seven for a little over a month doing the "Dream" vacation(at least in my families eyes) does have a certain expense, but i haven't looked at real numbers to see if it is even worth the trouble.

Thanks
 
I was not trying to be a wiseass, do the math, you get hammered on commission, so you mine as well not worry about it, and enjoy your European Vacation with the Griswolds!
 
I think the Euro is already close to it's peak, I doubt there's much risk of it going a lot higher right now. Check out the "Big Mac Index" and you'll see how overvalued the Euro is right now:
http://www.economist.com/finance/displaystory.cfm?story_id=11793125

I think the bigger thing to worry about if you have to exchange a signifigant amount of money would be the spread. Typically any bank or credit card company will take about a 2.5% cut when you exchange currencies. So if you have to exchange $20,000 for your vacation, you'll lose $500. I've heard that this is one of the biggest money makers for banks.

For any amount over $1000, I'll use my Interactive Brokers account to make the exchange. For instance if I exchange $1000 CDN to US $, at the bank or with my credit card it will cost me about $25, through Interactive Brokers, with spread and commission, it costs me somewhere around $5.

I have only done this with American and Canadian dollars. Later this year I have to exchange a large amount of Euros to Canadian or American Dollars, I'm not sure yet if I can use my broker to do this. Let me know if you find an inexpensive way to exchange Euros.
 
Quote from skibumm101:

Ok, so here is a totally random thought, haven't full thought it out, but wanted to know if this makes sense.

I will be traveling to Europe in apx. 6 months, and most of the time will be spent in Countries that use the Euro. My personal sentiment is that the EUR/USD will continue to rise over the next 6 months making my poor US dollar weaker then it already is.

so here is the question.

Should i convert what i will be spending into Euros, and hedge the same amount with a long EUR/USD? If the dollar keeps falling(as i predict) then i will have "exchanged" my vacation money at a great rate. If the Dollar does gain some momentum, i will be out of savings, but not out anymore then what i was budgeting for this trip.

Thoughts?
More...
Buy half euros you are going to need. In case euro rises you already bought it at a good price and if it falls you are going to buy second part at a good price.
 
Why tie up your money for 6 months in Euros that might just as well go down instead of up. If you have $20,000 to spare, why not invest it in something that is more likely than Euros to go up 10 or 20% in six months.
 
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