Should you convert $A for that planned overseas trip now, or wait?

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Should you convert $A for that planned overseas trip now, or wait?

By John Collett

The Australian dollar is forecast to rise by more than 5 per cent over the next couple of months, so those planning an overseas trip may be better off delaying their purchase of overseas currency until closer to the date they leave.

Michael Judge, head of Australia and New Zealand at OFX, an online foreign exchange company, says there is more “upside” to our dollar from current levels. He says stronger commodity prices would continue to be supportive for the currency against the US dollar.

Most analysts are tipping the Australian dollar to be worth more against the US dollar, Pound sterling and euro throughout the rest of this year.

Most analysts are tipping the Australian dollar to be worth more against the US dollar, Pound sterling and euro throughout the rest of this year.Credit:Brendon Throne

Judge says our dollar could be worth as much as US75¢ by September, up from US71¢ now, and perhaps a little more by the end of the year.

The Reserve Bank of Australia’s aggressive stance on raising interest rates to fight inflation would also be supportive of our dollar, analysts believe.

The Australian dollar has already risen substantially against the UK pound. It was changing hands for about 53 pence at the start of the year but is now up to almost 57 pence.

Judge says there is likely more room for exchange-rate upside for our dollar against the pound than for the euro, which is now trading at about 67 euro cents to the Australian dollar.

Joseph Capurso, head of international economics at the Commonwealth Bank, is expecting the Australian dollar to perform well against all three major overseas currencies – the US dollar, the pound and the euro.

He says the value of the Australian dollar was held back by lockdowns in China that crimped demand for our commodities, but those lockdowns have either ended, or at least eased – and commodity prices are headed higher again.

He says our dollar could reach US76¢ by September: However, he does not see quite as much upside against the two other currencies in the upcoming months.

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Exchange rates are notoriously difficult to predict and views of currency market watchers often vary.

Fiona Griffiths, currency specialist at the Currency Shop, a comparison website, takes a differing view on the US dollar exchange rate.

Higher interest rates in one country, compared to others, can attract more global investors, which can help to strengthen the country’s currency. However, both the US and Australian central banks are raising interest rates, Griffiths says.

She says a clouded outlook for the economy in China – Australia’s principal trading partner – could continue to weigh on the value of the Australian dollar.

If you are travelling to the US, “changing Australian dollars for US dollars sooner, as opposed to closer to departure, could be beneficial,” Griffiths says.

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However, the Australian dollar could continue to rise against the pound for the remainder of this year, given the deteriorating economic outlook for the United Kingdom, she says.

“According to the OECD, UK economic growth is expected to stall in 2023, which would mean that the Bank of England could struggle to raise interest rates without tipping the country into recession,” Griffiths says.

It could therefore be beneficial for Australians travelling to the UK to buy pounds closer to their departure date, she says.

The Australian dollar has strengthened against the euro this year, with the value of the euro hit by fallout from the war in Ukraine.

However, inflation is soaring in Europe and the European Central Bank is expected to increase interest rates in coming months, which could help to lift the value of the euro, Griffiths says.

“It could be [better] to change Australian dollars for euros sooner rather than later in the year,” she says.

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