Why Aussie travellers should lock in their exchange rates before travelling to the US
Planning a trip to the US? Here’s why you should lock in the exchange rate on your travel money card now.
If you’re thinking of taking a trip to the land of stars and stripes in the near future, you might want to lock in your exchange rate as soon as possible. The Australian dollar has taken a fall, meaning that you’ll get less bang for your buck when exchanging your Australian funds to US currency on your prepaid travel card.
Learn why the dollar has dropped and what you can to do protect yourself.
What does this mean for me?
A poll of analysts by Reuters predicts that the Australian dollar is due to fall, seeing the currency at US69c in 12 months time. So if you’re planning on using a prepaid travel money card on your trip to America, there isn’t a better time than the present to lock in your US currency.
Say if you were to load $3,000 and lock it into US dollars on your travel card when the market was sitting at the 70c mark, you’d end up with $2,100 US dollars. If the Aussie dollar continues falling and ends up at 67c around the time of your holiday though, you would end up with $2,010 US dollars once you completed the transfer.
This means you’re down $90 compared to if you exchanged your currency now. However, keep in mind that exchange rates are slightly unpredictable, so there's always the chance that it moves and, if you hadn't locked in your funds yet, you could gain the $90 or more.
Why has the Aussie Dollar dropped?
While the Australian dollar has been on a one-month high, jumping as high as US72.43c on 4 February, it is predicted to fall in the coming weeks. By 5 February the value had already reduced to US71.73c.
The fall has been attributed to a disappointing Christmas period in the US with retail data was well below the consensus. After hiking rates in December by 25 basis points, the US Federal Reserve System (Fed) has predicted that it will continue tightening monetary policy this year.
Unlike the four hikes that the central bank forecast in December, the Fed predicts it won’t lift its rates until March and that they may only rise once in 2016. The end result? Less money for Australian travellers.
While there’s not much you can do about the falling dollar, there are ways you can limit the damage it has on your travel budget. Do your research and exchange your rate if you can. If you’re still comparing travel money cards, check the provider's website to see the exchange rates in place.