When to convert Dollars to Euros?

September 9, 2007 5:30 AM

Financial Advice: I need to convert a lot (10k?) of Dollars to Euros in the next few months. When should I? Are there some pretty well-known patterns in the ebb and flow of these currencies?
posted by sirion to work & money (18 comments total)

Worst. Time. Ever.

I'd suggest leaving it as late as possible on the grounds that surely the dollar can't go any lower than it is now, but nobody seems to have any confidence even in that.
posted by genghis at 5:37 AM on September 9, 2007

If there were well-known patterns, it would be pretty easy to make a lot of money. So, I think the answer to your last question is no.
posted by mpls2 at 5:41 AM on September 9, 2007

No pattern. If you figure one out then let me know. But the dollar is at pretty much an all-time low against the euro, so it's going to hurt your wallet.

Concentrate on getting a decent exchange rate / low commission rather than getting ripped off by bureaux de change. Look at the amount in the paper. That's what big institutions with millions to trade get. Then try to get as close to it as possible.
posted by TrashyRambo at 6:52 AM on September 9, 2007

When they say Worst. Time. Ever., they're referring to this pattern, which has been going on all year, pretty much. Sure, you would have done a little better in June or August, but you're still not doing that well.

Here is a spreadsheet/graph I've made of the dollar vs. the euro since 1998, using data from oanda.com. Look for patterns there, perhaps.
posted by xueexueg at 6:53 AM on September 9, 2007

The first question is, *why* do you need to convert those dollars? Making that exchange in the U.S. will cost you a huge amount in fees, in addition to the weak exchange rate. If you are going to Europe, I would not exchange a single penny until you reach your destination, and then make the exchange there. The exchange rate may still be weak, but at least you won't lose ten percent to junk fees.
posted by Lokheed at 7:30 AM on September 9, 2007

If you can push it off, push it off as long as you can because the exchange rate pretty much sucks now. If it's to make like a trip or something, get a Capital One credit card because they're the only credit card that doesn't charge you a foreign transaction fee and that can drag out the converting even farther.
posted by wangarific at 7:39 AM on September 9, 2007

As soon as possible. This is how it looks over the past year. Day-to-day fluctuations are pretty intense these days and it probably won't get any less volatile over the next few months. The dollar:euro rate hasn't gone up and stayed up in ... well, ever. As this subprime thing continues to unravel, among all the other things currently affecting the US economy, the USD will continue to slowly chug downward.

September 3 would have been good, since the US jobs report came out Friday and screwed the dollar some more. There are a few financial reports coming out Federal Reserve (Monday, Consumer Credit) and the Census Bureau (Tuesday, Trade Balance) which might further depress things if they are as gloomy as everything else has been recently. Also, at their September 18 meeting, the Fed will almost definitely announce an interest rate cut, which pretty much guarantees more downward pressure on the dollar.

I'd watch the day-to-day rates and pick the first day this week that doesn't look horrible. Remember, bank fees are one thing, but if you wait and e.g. take it to a European bank as Lokheed says in his assumption that you're in the US, you just lost out on a few hundred EUR over the few months you're waiting.
posted by blacklite at 8:36 AM on September 9, 2007 [1 favorite]

The real trick is minimizing the fees. It's not worth fixating over 3$ or 4% exchange rate fluctuations if you have to pay 5% more to convert the money.
posted by smackfu at 8:46 AM on September 9, 2007 [1 favorite]

I'm living in Europe and need to refill my austrian bank account.

I'm looking at ~1% exchange rate from just withdrawing from my US account or a ~0.3% rate from a $10k wire transfer.
posted by sirion at 10:03 AM on September 9, 2007

Anyone who claims they have any idea what's going to happen to the dollar in the next 6 months is either ignorant or trying to scam you.

Figure out what you can handle psychologically. If you want to minimize the risk of getting screwed by a dollar crash, exchange it all now. If you want to be able to benefit a little from a rise in the dollar, while not losing too much if the dollar falls, then use dollar-cost averaging. Change 1/4th of your money every 6 weeks.

Both of these plans have the advantage that you make your decision now and then you execute it. The last thing in the world you want to do is spend the next 6 months watching the dollar rise and fall, and stressing out over what you should do.
posted by fuzz at 10:11 AM on September 9, 2007

Is it possible to set up a bank account over there? A wire transfer may wind up costing you less in fees than a straight currency exchange.

I like fuzz's cost-averaging plan, too.
posted by scody at 10:15 AM on September 9, 2007

Shop around. I know someone who gets a big part of his income in a foreign currency and he goes to talk to different banks and negotiate the best deal. In your case: "But bank X is willing to give me rate Y. I'm sure that when I'm opening an account with bank Z you can do better than that, can't you?"

Bank personnel often get commission so you might be able to negotiate a good deal.

If the US dollar is going to fall any further (and with a growing deficit, the mortgage crisis and the ongoing war in Iraq and the high oil price that is likely) you might not want to wait too long.

I myself, after I immigrated to Canada, changed 60 K of euros into CAD for an extremely bad rate (almost 5 K "vanished") after a wire transfer. I only found out after the fact that banks don't use a standardized rate for wire transfer & currency exchange. Shop around.
posted by maremare at 1:07 PM on September 9, 2007

The putting it off advice is total bunk. There's no way of knowing if it will go up or down. It may be bad but it most certainly can go worse.

The best thing you can do is look for the lowest fee for the lowest rate at any given point in time. That is don't try to time the market, but you can still arbitrage between banks and brokers.
posted by geoff. at 1:07 PM on September 9, 2007

If you're asking MeFi, then there's no point even trying. You may as well toss a coin to decide between now or later.

Speculating in currencies is no different from speculating in stocks, bonds, real estate or any other asset class: arbitrage opportunities definitely exist but you need the resources and expertise of a professional to be even moderately successful. And you need a lot more than $10K (unless you use leverage, which can be lethal) -- probably several hundred thousand at minimum, with multiple positions on different currency pairs.

Do whatever you want, it's all equally likely to lose you money.
posted by randomstriker at 1:46 PM on September 9, 2007

Do whatever you want, it's all equally likely to lose you money.

From the perspective of the Efficient Market Hypothesis, that is.
posted by randomstriker at 1:50 PM on September 9, 2007

I'm no financial wizard, but if you are really worried about losing money, I *think* you should be able to set up some sort of hedge on this transfer so that you break even minus the transfer fee, no matter what the dollar does.
posted by Eringatang at 6:03 PM on September 9, 2007

I will be needing to do something similar to this and was told that my best option was to leave the $ in my US based bank account and use an ATM as needed. Only thing that I was told I needed to find was an international bank (citibank, hsbc) that would not charge for international ATM withdrawals. Or a minimum per withdrawal.
posted by wile e at 5:53 AM on September 10, 2007

A bank may not charge a fee for international ATM withdrawals but sure as hell you will not be getting the best possible rate on the exchange; perhaps quite a few percentage points off.

Usually you can get a better rate on a larger transfer, so it's time to do some bank-shopping.
posted by polyglot at 8:17 AM on September 10, 2007