If you were travelling overseas in September 2008, your Australian dollar would have been worth US$0.6009. That's almost half of your travel kitty gone due to an unfavourable exchange rate.
Luckily, if you're travelling overseas in the near future you can ensure that your money goes much further. In May, the Australian dollar hit a record high against the greenback of US$1.10. While this rate of exchange has fluctuated since, the Australian dollar remains above parity with the US dollar making it the perfect time to organise travel overseas, exchange your travel money or prepay your flights, accommodation or other travel expenses.
Fluctuations In The Market
The foreign exchange market determines the value of one currency against another at any one time.
Exchange rates vary from day to day, and determine the conversion rate for your travel expenses or money exchange. This means that the amount of money you get when you exchange one currency for another can change at any time. It also means that the cost of any overseas purchase when converted to your national currency will vary depending on what the exchange rate is at the time of sale.
How To Protect Your Money
The current strength of the Australian dollar means that by paying for your travel expenses or exchanging your money now, you ensure you get a high rate of exchange. The exchange rate will determine the actual cost of your overseas trip, so it's in your best interest to lock in a rate of exchange that ensures your money goes as far as possible when overseas.
Whether you're travelling in a week or in six months now is a low-risk time to exchange your money and lock in a good conversion rate. The Australian dollar is at a record high, and Australians can enjoy the confidence of knowing they are getting a favourable exchange rate. If the Australian dollar decreases in value, then you will have saved money on your overseas transaction or currency exchange.
Level Of Risk
It is important to understand that hedging your money against the foreign exchange market always involves a level of risk. Predicting market movements and fluctuations is just that – a prediction – so while you may save money, there is always the risk of losing money depending on when you make that transaction.
If you're travelling overseas, take advantage of the strong Australian dollar and protect your money from the possible changes to exchange rates. You'll have a little extra spending money to peruse the shops and pick up some holiday souvenirs. If you're moving overseas or travelling for an extended period of time, your money will also go further when making international money transfers or overseas purchases.
The Bottom Line
Make the most of the strong Australian dollar - now is the perfect time to book, plan or pay for your overseas holiday.
Visit Yahoo!7's Currencies Centre or Forex Education Centre for more information.
This information was brought to you by OzForex Foreign Exchange Services. It is not intended to constitute financial advice of any kind.Yahoo!7 Finance Calculators:
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