Purchasing US dollars now for a round the world trip in 2014

[fersea]

Firstly apologies if this post doesn't quite fit here, it is not so much about flying but trip planning.

As I have mentioned here in my previous posts, I am planning on doing a Round the world trip in 2014. I note the Australian Dollar in comparison to the US Dollar has bounced in recent weeks from going below parity to around $1.04. Now I am thinking, if I can get 1 for 1 (which after fees is probably about what it would be) I would be pretty satisfied with that. Of course there is a possibility it may go higher, but who knows, the long term trend is certainly not for greater than parity.

Are there ways I could lock in a price for US dollars now? I know there are the ANZ or Jetstar travel cards or the like but I think they are pretty steep on the fees and I am not sure the conversion is that great.

This may sound a stupid question, but am I able to open a US bank account from Australia?

(Of course putting any money in another account would mean that it is not in my Australian offset account reducing the interest on my home loan so that would have to be taken into consideration, but a round the world trip of $1AUD = $0.75USD would be a lot more expensive than it currently would be)

Appreciate any advice.

 

[opusman]

Realistically your options are buying a travel card, or buying cash (or travellers' cheques).
Cash is cheaper but then you have to carry it with you.
ANZ have a card which lets you load multiple currencies - you say you're going round the world so presumably you will want more than just US dollars.
Amex have quite a good travel card product with minimal fees (though not stellar exchange rates), but you need separate cards for different currencies and they only support EUR/USD/GBP.

I usually take a bit of cash in all the currencies I will need (no more than $500 AUD worth each), and put a few thousand $ worth on a travel card. The thing about the exchange rate at the moment is, even if you do end up paying 4% in exchange fees, it's SO much better than it was a few years ago that you're doing pretty well no matter what rate you end up getting.

 

[nickfromeastryde]

About 6% interest income a year you are willing to give up means you are already taking a huge gamble on the rate collapsing over the next 2 years, ie in real terms you will be settling for a rate less than 90c to the dollar. To me that is a huge gamble

What do you think is going to change over the next 2 years that will cause the AUD to collapse?

 

[fersea]

It won't actually be 6% for 2 years because in about 9 months I should have paid off the mortgage. (Planning 2014 for the world trip because it is a bit the perfect storm of mortgage paid off, LSL will be due, and 2013 will be a big year work wise and they are pretty good at looking after you with time off when you have been doing big hours, plus have > 140K Qantas FF points so can do the one world trip).

I have no idea whether the AUD is going to collapse or not, but I am thinking that if it was any better than one for one I would be happy with that. Didn't it get to about $1.10 at its peak? I don't think anyone would think it would ever go higher than that but there is always a chance it will go back down to the 75c-80c that it was for the previous decade.

I guess interest rates are something that worry me about the strength of the AUD. US interest rates can't really fall but Australian interest rates are likely to.

I guess in summary if someone could guarantee me 1AUD = 1USD and the current rates for the GBP and EUR for my 2014 trip, I would say "yes please" and take my chances that I might be worse off.

 

[moa999]

If you want us dollar exposure without the hassle of bank account etc, use an etf with ticker usd.
US Dollar ETF | BetaShares

 

[Maca44]

I have no idea whether the AUD is going to collapse or not, but I am thinking that if it was any better than one for one I would be happy with that. Didn't it get to about $1.10 at its peak? I don't think anyone would think it would ever go higher than that but there is always a chance it will go back down to the 75c-80c that it was for the previous decade.

I think I was getting about 51c in Sept 2001, but who knows that dollar will do.

 

[ncairns]

How much were you thinking of spending? If you have a large amount of money to convert into foreign currency ($25k or more), you could consider buying a foreign currency option. Most banks with global markets operations offer these and there are some specialist forex providers too.

A Foreign Currency Option grants the purchaser of the option the right, but not the obligation, to buy (call) or sell (put) foreign currency at a specified exchange rate within a specified period of time.
You want to sell AUD and therefore you could purchase a put option on AUD (which is equivalent to a call option on USD) with a strike price of say 1 AUD =1 USD and an expiry date around 2014. You can keep your money in your offset account until then in order to reduce your home loan interest. If by 2014 the value of the Aussie depreciates to say USD0.90, then you can exercise your option at the strike price of 1USD. If however the value of the Aussie appreciates to say USD1.10, then you don't have to exercise your option. Just let the option expire and exchange your money at the prevailing market rates. Options do have a cost, however, and this known as the option premium. This is effectively an "insurance" premium for the writer of the option.

A word of caution though. Do not enter into an options agreement unless you know what you are doing.

 

[markis10]

This may sound a stupid question, but am I able to open a US bank account from Australia?
.

'
I dont believe its possible to open a US bank account in Australia easily (although this is on offer through some on application), however many banks do offer USD accounts locally (often only to ABN holders), which is a different beast to the fee rich travel cards that are on offer.

Dual Currency Account - Citibank Australia

ANZ Foreign Currency Deposits - ANZ offers a full range of Foreign Currency Accounts to suit your needs. | ANZ

Foreign Currency Accounts - onshore - NAB

Foreign currency accounts - Westpac - Business

 

[simongr]

It won't actually be 6% for 2 years because in about 9 months I should have paid off the mortgage. (Planning 2014 for the world trip because it is a bit the perfect storm of mortgage paid off, LSL will be due, and 2013 will be a big year work wise and they are pretty good at looking after you with time off when you have been doing big hours, plus have > 140K Qantas FF points so can do the one world trip).

It may not be 6% due to the mortgage being paid off - but you need to factor in what deposit rate you could get - maybe 5% (ING term deposit)?

I personally wouldnt be wanting to tie up substantial cash in this way. I also wouldn't want to be carrying the physical cash (I never exchange cash for foreign currency - I always use the overseas ATM).

I would expect that your biggest expenses are going to be hotels - the rate for which you could lock in fairly in advance by advance purchases.

 

[fersea]

appreciate the help. @simongr, yes you can get a term deposit rate and that is probably what I will do once my mortgage and savings account his equilibrium probably around April next year, but of course that 5% from ING is subject to tax, so works out much less than that.

markis10, thanks for those links. Also from research it seems you can use sites like ozforex to get a better rate. You do however get charged with fees from the banks for putting money in. I would be interested to know which ones are easily linked to be able to withdraw from ATMs because as Simon said you don't want to be carrying wads of cash.

Hard to know what to do, I am going to NZ in a few weeks (but probably won't spend much so that won't make a big difference) and Hong Kong/Singapore in November but the big trip is still over 18 months away, but it is tempting to want to lock something in now when I look at the currencies I will probably want (Chillean Peso, Argentinan Peso, Brazilian Real, USD, Euro and South African Rand and almost all are at or near 5 year highs at the moment.

I did also order one of those 28 degree credit cards the other day. Sounds like a good rate and no fees, but obviously it is based on the exchange rate of the day rather than locking exchange rates in.

 

[Mal Ware]

appreciate the help. @simongr, yes you can get a term deposit rate and that is probably what I will do once my mortgage and savings account his equilibrium probably around April next year, but of course that 5% from ING is subject to tax, so works out much less than that.

markis10, thanks for those links. Also from research it seems you can use sites like ozforex to get a better rate. You do however get charged with fees from the banks for putting money in. I would be interested to know which ones are easily linked to be able to withdraw from ATMs because as Simon said you don't want to be carrying wads of cash.

Hard to know what to do, I am going to NZ in a few weeks (but probably won't spend much so that won't make a big difference) and Hong Kong/Singapore in November but the big trip is still over 18 months away, but it is tempting to want to lock something in now when I look at the currencies I will probably want (Chillean Peso, Argentinan Peso, Brazilian Real, USD, Euro and South African Rand and almost all are at or near 5 year highs at the moment.

I did also order one of those 28 degree credit cards the other day. Sounds like a good rate and no fees, but obviously it is based on the exchange rate of the day rather than locking exchange rates in.

You can Western Union yourself money and I believe it is good for one year.

I do that all the time when I am travelling to Asia, if it is at the correct rate and I am going there in a couple of months I will put a couple of thousand dollars into it and just pick it up when I am there. Of course there is a fee but it still works out to be value imo.

I am in Manila right now but didn't bother doing it this trip as the dollar was on the way up and so is the peso.

 

[Sprucegoose]

About 6% interest income a year you are willing to give up means you are already taking a huge gamble on the rate collapsing over the next 2 years, ie in real terms you will be settling for a rate less than 90c to the dollar. To me that is a huge gamble
?

Then you need to factor in tax and the volatility of the currency.

I would lock in half of what I need now as you will clear 1:1 at present and that's always a clear benchmark




Sent from my iPhone using Aust Freq Fly app

 

[scwappy]

HSBC and Citi both offer foreign currency accounts and offer
Competitive rates when transferring cash. They would be a better option
in my view than the travel cards in offer which sting you on conversion fees.
When the time comes to use foreign currency use a Citi plus or 28 degrees
card to avoid fx fees and convert your foreign currency back to AUD. Quite close to a perfect
hedge.

 

[LAH]

my opinion for what it is worth. it is a round the world trip, so I would imagine you'll be changing currencies all over the world. If you want this rate on usd, get it now! but what currency are you going to change the usd to? if you are mainly going to the US and going to be spending usd, I think the rate is pretty good now and use some of the advice above. But, if you are going to be changing and changing - I'd think about another strategy if I were you.

 

[Aussie Doc]

my opinion for what it is worth. it is a round the world trip, so I would imagine you'll be changing currencies all over the world. If you want this rate on usd, get it now! but what currency are you going to change the usd to? if you are mainly going to the US and going to be spending usd, I think the rate is pretty good now and use some of the advice above. But, if you are going to be changing and changing - I'd think about another strategy if I were you.

Last year I locked in US, UK and Japanese funds in cash for the 3 trips my wife and I are doing over these 12 months. I've been hit before not doing this and then seeing the AUD fall from $0.90 to $0.60 over the course of a few months which made the planned trip a lot more expensive and tightened the budget. Hence now if there is a good exchange rate I lock it in. Turned out to not be needed this time as the AUD stayed pretty strong, but I'm much happier than I would have been if I didn't and the AUD fell dramatically!

 

[Scout]

I am travelling to the USA in November, and got some USD cash now, plus some USD on a CBA Travel Money Card. A little minor currency speculation may pay off!

 

[kempvet]

This may sound a stupid question, but am I able to open a US bank account from Australia?

In my experience NO.
You would have to be in person in the US with the following,
ID such as a passport and/or government issued ID such as drivers license.
Utility bills such as electricity in your name at a place of residence.

US banks are also know for their hidden fees, overdraw you account even by a few cents and it is $35 penalty, and with my US bank account you get the great interest rate of 0.01% per year. If you are looking at a few months travel in the future, you may need to assess the opportunity cost with getting zero interest on your funds having them shoved into a US bank account.

Just my opinion, I think the days of extreme volatility in exchange rates may be in the past, Australia has a bit of a safe haven status these days, which was not the case when the rate plunged to 60 cents at the beginning of 2009.

 

[drewbles]

In my experience NO.
You would have to be in person in the US with the following,
ID such as a passport and/or government issued ID such as drivers license.
Utility bills such as electricity in your name at a place of residence.

US banks are also know for their hidden fees, overdraw you account even by a few cents and it is $35 penalty, and with my US bank account you get the great interest rate of 0.01% per year. If you are looking at a few months travel in the future, you may need to assess the opportunity cost with getting zero interest on your funds having them shoved into a US bank account.

Just my opinion, I think the days of extreme volatility in exchange rates may be in the past, Australia has a bit of a safe haven status these days, which was not the case when the rate plunged to 60 cents at the beginning of 2009.

It's not so difficult to open an account in the USA, but don't expect to be able to get a good credit rating easily.

Getting a SSID isn't as hard as people thing, it's just some pen and paper pushing. They aren't any use for travel though really, and it is too much effort for the occasional traveller (I'd only bother if you planned on spending a significant amount of time, regularly, in the USA).

 

[clifford]

I think the days of extreme volatility in exchange rates may be in the past, Australia has a bit of a safe haven status these days, which was not the case when the rate plunged to 60 cents at the beginning of 2009.

Well good luck with that theory. The Aussie is a plaything of speculators and hedge funds and will plummet like a stone if it suits them. Just a matter of when.

 

[Dougo]

I like to take a bit of cash with me and avoid those travelex type cards like the plague. If it was me and I was cashed up, I'd buy some USD and Euro and GBP if I was heading to the US, Europe and the UK. Depending on how long you are going for and how long you plan to stay in different places, you don't have to buy a lot ... enough to fit your comfort zone for the moment.