Euros or dollars?
July 14, 2010 3:59 AM   Subscribe

Should I go ahead and buy pounds (or euros) now or wait and buy dollars?

I'm moving from South Korea to the UK at the end of September, and I'm considering going ahead and buying pounds rather than sending money to my home bank account, which would be in US dollars. My reasoning is that right now, the pounds is fairly low -- or at least, lower than it was a few months ago. Right now, sending money home (in dollars) is costing an arm and a leg with the exchange rate, and it doesn't look like it's going to be any better before I leave in September. Whereas if I buy pounds, the exchange rate against the dollar might go up and I might come out of this gaining money rather than losing money.

Is my logic sound, or is this a really stupid idea? And if I'm not being an idiot, would it be a better idea to buy euros than pounds?

To my knowledge, I have no way of opening a UK account here in Korea, so when I leave Korea, my only options are to send all my money to the US in dollars or withdraw it and buy other currency.
posted by canadia to Work & Money (9 answers total)
 
Well, it might also go down. If I could tell you for sure what to do I'd be rich.
posted by pewpew at 4:05 AM on July 14, 2010 [2 favorites]


Will you be needing pounds anyways?

Nobody can tell you which way exchange rates will go but it seems to me that its better to buy pounds now than to go Won -> Dollars -> Pounds just because of the commisions on two exchanges rather than one.

There is no reason not to buy *some* pounds now as a hedge against the pound getting stronger. That part is just reasonable hedging.

But buying euros because of what they might or might not do puts you into the risky realm of currency trading.
posted by vacapinta at 4:19 AM on July 14, 2010 [1 favorite]


Sorry, just to clarify: I'm not asking if I'll make money, I'm asking if buying pounds instead of dollars is a good idea.
posted by canadia at 4:20 AM on July 14, 2010


I'm asking if buying pounds instead of dollars is a good idea.

The general gist of the previous comments and mine is that you really can't know; exchange is a tricky game to play and you could either gain/lose by buying pounds now vs. later. There's no real way of telling whether you should send later vs. buy now, other than to speculate as to where the currency market will be at the end of September.

One option might be to see if there are any U.K. banks operating in South Korea and, if so, if they might have a U.K. account option out there. This won't ease the currency exchange but may ease the burden of having to make multiple exchanges at a later date in order to have the proper currency when you arrive.
posted by Hiker at 4:37 AM on July 14, 2010 [1 favorite]


I have found that you will often get a tighter spread on USD to other currencies than to GBP or EUR. You could check the percentage between the buy and sell from your local exchange / bank. I expect if you tried to exchange KRW in the UK you would find a pretty wide bid/ask spread and would lose quite a lot on the exchange relative to, say, doing KRW to USD and then withdrawing from a USD account to Euro or GBP by ATM.

Maybe a global bank like Citi or HSBC could be used - they aren't the "same" bank in all countries, but their global network can help make transfers between affiliates less troublesome. You might expect at least lower wire-transfer fees and possibly a favourable forex rate, depending on how much you need to transfer.

Also, would there be any advantage to seeing if there are arrangements around the US military in South Korea that might offer more competitive exchange rates USD/KRW?
posted by sagwalla at 4:45 AM on July 14, 2010


yeah spreads for the USD are smaller, but still bigger then the direct cross (otherwise it would be like the easiest arbitrage in the world)
posted by JPD at 4:54 AM on July 14, 2010 [1 favorite]


This question gets asked all the time and the answer's always the same - nobody can tell you for sure. Would it not be possible to just withdraw from whatever accounts you have from an ATM in the UK - if you get a sensible card that doesn't charge fees or commission, you'll just pay the VISA transfer rate which would probably be the best deal you can get.
posted by turkeyphant at 5:03 AM on July 14, 2010


Would it not be possible to just withdraw from whatever accounts you have from an ATM in the UK?

I'm from the US, and when I studied in London for a year I never opened a UK account. My US bank only charged a dollar per withdrawal (even abroad), so whenever I needed money I just went to an ATM.

I did purchase several hundred pounds before I left for the UK, mostly just so I'd have some cash to use once I arrived. It probably wouldn't hurt to buy some now/withdraw the rest later. I guess it depends how much money you're dealing with.
posted by skilar at 5:22 AM on July 14, 2010


Whereas if I buy pounds, the exchange rate against the dollar might go up and I might come out of this gaining money rather than losing money.

or

Whereas if I buy pounds, the exchange rate against the dollar might go down and I might come out of this losing more money rather than gaining money.

Just changing a few words gives you a different result. In other words, spending money is not an investment.
posted by Ironmouth at 7:19 AM on July 14, 2010


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