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Buying the Euro Early

I am planning two 10-day trips with my family in 2023 and 2024, one each to Italy and France. I was reading this morning that the Dollar and Euro are almost equal ($1.00 = €1.0006858). Typically take a few hundred dollars in Euros or Pounds and withdraw money at an ATM when I need it, but usually pay for most of my expenses over there in cash. I was wondering if it might be a good idea to calculate what I will spend on these two trips and buy the Euros now. For a family of three travelers, excluding travel and lodging, I calculate about $1,500 for each trip. Last time I went to Europe the Euro was 1.35 to our dollar, and a few months ago in Scotland it was 1.4 GBP. I figure the Euro will go back up to its previous value and if I buy now will save me about $1,000 over both trips. If it doesn't, I essentially break even. Would appreciate your thoughts.

Jim

Posted by
7321 posts

Whoever can accurately predict next year's exchange rate will get rich enough...not to worry about exchange rates ever again :-D
This being said, it looks like the Ukraine conflict and the energy crisis aren't going anywhere, so I doubt that the Euro will reach its past peaks as soon as next year. Also, I assume that your plan would be to buy euro cash? Exchange fees will eat into the savings, and you'll have to securely store the cash, including during your travels. Plus, cash payment is no longer the preferred form of payment in many places in France at least.

Now, to hedge against potential increase of the Euro, if you are certain that you are travelling next year, why not buy €500 or so, but more seems excessive to me.

Posted by
8951 posts

It all has to do with your personal preferences and comfort with risk. You should keep in mind that cash is being used less and less in Europe, but then do what you want in this matter.

Do remember that money converted to Euros and sitting in a drawer for two years is money that is not working for you or earning interest

Posted by
251 posts

Ciao Jim. It is true that the value of the Euro is at a very low level. However, I would only buy Euros in the US now if you can get a really good rate. Often the banks (or AAA) charge a large exchange fee that negates the savings. So check what rate you can get first.

Posted by
7241 posts

That’s a long way out to pre purchase currency, but it’s a personal preference. If the rate is $1=1€ a currency exchange will probably charge $1.08 or so, plus a $5 fee. Still better than the exchange rate a few years ago. With contactless payment being as popular as it is now, if it was me, I’d wait and take my chances for most of the amount you’re talking about. If you know somebody heading to Europe, maybe give them some money and they can get Euros from an ATM for you at a better rate.

The Euros I used in Spain earlier this year when the rate was $1.05-1€ I got in Sicily in 2018 when the rate was $1.18. Oh well, I lost some money on that one. On my upcoming Scotland trip I’ll be using up the pounds I bought from my sister in 2016 after her trip when the rate was $1.24-£1. The rate now is just under $1.17-1£ so I’ll lose money on them too. It’s all a gamble.

Posted by
1137 posts

If any of us could predict what currencies will do two years in advance, we would be too rich to worry about this.

Posted by
7113 posts

You could buy some now and some later. That way you're not putting all your eggs in the same basket.

Posted by
16167 posts

If you buy, let’s say, €10,000 today (for $10,000, for example) a year earlier, and keep your money under your mattress, you will have incurred an opportunity cost. You will have foregone the income potential that those $10,000 could earn you if you invested that amount. If you believe that the Euro will go back up in a year, let’s say 10% more, a better investment strategy is to buy $10,000 in a mutual fund that invests in Eurozone assets (stocks, bonds, government bonds, monetary fund, or a combination of the above depending on your risk appetite). If the prediction that the euro will appreciate by 10% turns out to be true, you will have likely gained on your investment, and if you were lucky enough to choose the right class of assets (the ones which will go up), you will not have missed on the earning potential those assets might give you. So for example, if the euro goes up 10%, and the assets in the Euro focused fund increase another 10% in euro terms, your investment in dollars will have increased more than 20% (21% to be exact).

Posted by
10710 posts

What you pay your US bank will eat up any profit. You could look into Wise, a money exchange company, which will issue a debit card, as long as they don't try to charge you for holding the funds. You can even request a trigger rate.
You can't use another currency broker because you'd need a bank account where you are going.

Otherwise, just pull out from an ATM what you want in 2023 for 2024. And if the Euro goes to 1.35euro for $1.00, you will have lost the gamble. Our crystal balls are on strike.

Posted by
9050 posts

If I was six months away from the trip, I'd be tempted to do it. But not 1-2 years.

Posted by
1 posts

I got some money at my Bank for my next trip since I have to pay a driver on arrival and didn't want to deal with an ATM at the busy Airport.

While the market rate is enticing, keep in mind that your Bank will likely have a slightly higher exchange rate.

For example, when I got my money, the market rate was about $1=€1.00 but they quoted about $1=€1.05 and then they added a $10 service fee.

Posted by
34132 posts

also remember that if you take more than $10,000.00 or 10,000.00€ in cash over a border it must be declared at each border. It can be confiscated.

Posted by
10710 posts

He takes 5, and his travel partner carries 5. US authorities are just looking for money laundering. You have to declare the source of your funds when you are changing with a money broker for the first time.

Posted by
421 posts

Hedging = Humility. I buy a small amount of EUR for trips 1-2 yrs' out, when the rate dips, because I have no clairvoyant powers and find it beneficial to lock-in (exchange rate) certainty when budgeting for trips. My bank charges .04, so right now, at current parity levels it's ~$1.04 for every Euro purchased. Will it go lower? Maybe. But like anything else there's a risk/reward element. I'd rather know what something will cost than leave it to the fate of the wind and central banks.

Posted by
28358 posts

I picked up an extra few hundred dollars' worth of euros and British pounds during my 2019 trip and brought them home for use in 2020. Guess how that worked out? That currency isn't looking so attractive right now, and I've had to protect it all along the way. I'm currently papering the UK with my about-to-be-witndrawn paper 20-pound notes. I'm darn lucky Great Britain hasn't yet gone as far as Norway in preferring electronic payments. I don't envy any tourist who arrives in Norway with hundreds of dollars' worth of kroner to spend.

Posted by
1806 posts

We kept our Swiss francs from a 1990's visit for a future trip, but it never materialized. Last year during a connection at Zurich airport, I tried to pay for lunch with our stash. The young lunch counter staff gathered around the cash register to see the antique coinage for the 1st time - it had been recalled over a decade previously. At least it still had entertainment value.

Posted by
10 posts

Hi Jim

I have a June 2023 trip to Italy planned and I am absolutely purchasing euros at this rate. Remember it’s relative: Yes if the euro dollar rate is at about parity (1€ = 1$) you will probably pay $1.05 per € (the bank needs to make a profit to do this) but if the rate drops to say .95 you will pay 1.00 ie there will always be a spread. Given how liquid the euro market is the spread will be fairly constant across time and across banks.

I plan to bring at least €3000 for 3 people for a two week trip. Yes you could just take cash out of a euro based atm or use credit cards but, what will your bank and cc company charge to convert to US$? The answer is whatever they want because you will have no choice at that point.

As far as guessing where the rate “will be” in June 2023, sure who knows? But at a decades long low I’ll take that bet. Plus given huge inflation in Europe their central banks will be under pressure to raise interest rates which will most certainly cause the euro to become more expensive vs. the dollar.

As far as opportunity cost of the money I am earning essentially zero interest in a savings account so not losing much there. Yes you could invest that money but that’s not risk free.

As far as safeguarding of assets, I’ll also have to safeguard my $1000 dollar iPhone and passport so not a huge concern. Will just take what I need and lock the rest in the room safe.

As far as cash being discouraged sure. But I plan on buying things like gold for my new granddaughter on the Ponte Vecchio and I believe cash will give me more negotiating room.

Best of luck and have a great trip !

Jim

Posted by
10 posts

Unfortunately we both know I don’t have a choice unless I’m willing to break the law. I don’t need part of the story to be “grandpa smuggled this gold cross out of Italy for you to save $100 but it was totally worth it to be arrested at JFK” lol

With $1600 exemption for each of me and my wife we should be fine

Posted by
1806 posts

Images of merchants excited about a customer paying in cash belong in B/W movies. The most cash they can legally accept in 2023 is 1,000. Euro.

Posted by
10 posts

The most cash they can legally accept in 2023 is 1,000. Euro.

Fair enough although OP did say he pays most of his trip expenses in cash and was looking for advice about the current exchange rate and the wisdom of converting early. Forty years of financial services experience tells me I’d rather lock in a rate of 1.05 for as much of my trip expenses as possible. I totally get folks not wanting to carry wads of cash around, but if the bloke plans on paying cash anyway getting his euro now is more likely the better deal than ten ATM transactions at an uncertain rate plus transaction fees. Cheers!

Posted by
292 posts

Hi..I'm excited about the rate..I am going in 2 months..yes..I am buying b4 I go..yes..I use an ATM and credit card as well. I do pay drivers and stores in small towns cash..I have traveled to Europe many times and the rates have been high. I'm fine w my decision because my trip is soon..but I might not with your timeline.. keep an eye on rates and then make your decision.