Oct 30 2008
Frustrated at Having to Unwillingly Play the Forex Market
The US dollar seems to be going a bit haywire of late. First it was down for several months and now the thing is rebounding like crazy, at least when compared to the British pound and Canadian dollar. Lots of people make lots of money by dabbling with foreign exchange (forex) trading but I am not one of them.
I do business in four currencies and from time to time need to transfer my money from Paypal to my bank account or pay creditcard bills in other currencies. Unfortunately for me, I know nothing about fluctuations in foreign exchange and don’t really pay much attention to exchange rates so it’s always a crap shoot. I really have no interest in forex beyond attempting to not get ripped off too much when I exchange money.
My mum works in a bank and keeps coming home with updates of how well or how poorly the Canadian dollar is doing against the US dollar. Things have been up and down over the past few weeks and I’m not sure if I should swap my US money over to Canadian while the going is good or what. Because the US dollar has been so crap for so long I had been reluctant to change it. Now that it’s on the rebound I’m wondering if I should swap it over now or wait longer in case it gets even stronger against the Canadian dollar.
I really hate this part of being in this business. I guess operating in several currencies is a good thing but it’s also annoying to see small chunks of money being lost and gained based only on exchange rates. For me, it’s just an extra thing I need to pay attention to that I have zero actual interest in and it’s frustrating.
Do any of you pay much attention to exchange rates? If you’re planning a trip to you try to buy foreign money when the rate is good for you or do you just do like me, pay no attention to it and hope for the best when the exchange has to be made? I really should become more knowledgeable about this whol area but the whole idea of keeping on top of exchange rates just annoys me.
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I’ve been taking an interest as of late. It was on the list of “last few unanswered questions I have” - how to hedge against currency fluctuations.
There are a few things I have discerned so far though:
* You should probably focus on reducing risk rather than trying to profit, unless you intend to make a hobby of it. The best way to reduce risk seems to be to spread your bets somehow - so keep your funds diversified across a bunch of currencies. In stocks I’d do it by buying a range of stocks - e.g. with an index tracker. With currencies I’m not so sure how to do that, although I do know that you can get accounts in your home country denominated in different currencies. Getting an FX account and spreading your assets across multiple currencies might help.
* Diversifying your income can help - don’t just try to earn income from US visitors, but all over the world. You probably do this though.
* Changing your plans to account for currency changes will help you save money. If you can’t decide whether or not to go to Cambodia or Thailand, for instance, just see how each currency is doing and then go with the one that gives you a better deal. If there is a currency crash (e.g. iceland), it’s a good time to go.
* Failing all of that, the swiss currency is notorious for not shifting much.
As you can see, I haven’t really figured out a solution yet. I will write up my findings when I do figure something out though.
I have been paying a lot of attention lately although mainly AUS/USD and have set up a practice account with a forex company. I managed to wipe out 4/5 of what they gave me to practice with early on but I’m doing a pretty good job of rebuilding it now.
However it sounds more like you’re talking about changing money, if the CAD is trading well it’s worth changing your money then in the current market. Otherwise I wouldn’t usually bother like you. It’s just very volatile now.
The A$ was around 98c 3 months ago now its 67c - I am delighted to be getting an Adsesne payout just now! I find it works quite well that most of my expenses are in US$ and most of my earning are too.
Get a fee for what is a “nromal” rate for C$- if its good - buy some. I do average out my forex risk - if I need to transfer a large amount - I will transfer maybe a 1/3 for each of 3 months instead of risking it all on 1 day - sometimes you loose out a bit - but you average the risk
I am obsessed with exchange rates when I am travelling - for instance the Indo Rupiah bounces around between 15,000 and 18,000 to the GBP so I try and take more out when its on the up..
Probably doesn’t save too much but every little helps..its almost like a hobby keeping an eye on exchane rates
Having a strong dollar v pound is good for UK based adsensers….every cloud and all that.
FX rates are particularly interesting when you’re in country which experiences a financial collapse. I remember Ecuador in the old days (early 1999) when the exchange rate was 7000 Sucres for a Dollar. Then one month later it was 8000, another two weeks later 11000, then jumped up to about 20000 two days later. That was when they closed all the banks for almost 2 weeks. Fun.
There were a few ATMs in Quito still working, but only for foreign cards — and you had to walk for miles to get to them with the roadblocks and the general strike going on.
i was in australia a few months ago when the exchange rate was almost even with US dollars (it was AUS$1.04 to US$1 at the time) and i checked recently and it was AUS$1.51 to $1US!!! a hostel that cost us $20 a night when we were there would be $13/night today. geez, that would have helped out on my budget!
once i’ve already booked a trip though, i just choose not to pay much attention because it usually depressed me (like when i was in europe in july/august!) but in places like southeast asia where your money still goes far, it really didn’t matter all that much…
I don’t travel (this decade) so I have my paypal set to convert all my payments into $AUD.
I have no idea how to do my books in multiple currencies, and no reason to hold multiple currencies - so I don’t.