Looking at exchange rates and its affect by the strength of the pound
More than likely the largest single factor that will affect demand for the pound is the economic health of the United Kingdom or how the market is expecting the UK economy to fare in the future.
Sterling is what is known as a free floating currency, so its exchange rate or its price in relation to another currency is determined purely by supply and demand. In simple terms the more the pound is in demand internationally, the stronger its exchange rate becomes.
Investors are likely to move savings away from weakening economies. The worsening of expectations for the UK economy during 2008 goes a long way to explaining sterling’s sharp decline.
Strength of the pound and its effects on the exchange rate. A higher interest rate will mean you will get a far better return on bonds and other Government securities, therefore this in turn will tend to attract financial capital from abroad. If currency markets expect the United Kingdom base rate to fall, the pound as a knock on effect will tend to grow weaker.
A currency is likely to weaken in order to correct a big trade deficit, which is unsustainable in the long-run, therefore making cheaper exports and imports much more expensive.
One of the effects for most families is an increase in the cost of travelling abroad. As a pound buys less of a foreign currency, hotels abroad, goods and services will become much costlier.
This will also mean that imported goods to the United Kingdom in turn will become dearer to consumers and to businesses that import raw materials or components as part of their production process. Meanwhile exporters who price their goods in sterling will benefit as their goods will become cheaper in overseas markets
How and where to exchange your currency
When you are travelling outside your country you may well need to exchange money.
With currency exchange rates varying from not only place to place but also daily, where and exactly how you will decide to exchange your currency can make a big difference to your wallet.
Before you decide to travel, it is always best to do a bit of homework and find out what the foreign currency exchange rate is in the country you are hoping to visit. This can be done by using the Universal Currency Converter which provides you with a fair idea about the latest exchange rates which are based on the mid point between the buying and selling rates of big value transactions in all the global currency.
Many people, mainly those flying a distance and possibly arriving in a foreign country very early in the morning or even late at night when the banks and currency exchange desks could well be shut, prefer to get a small amount of currency prior to departing on their journey.
In order to find the very best exchange rate, it is wise to wait until you arrive at your destination. Whilst most major airports have a currency exchange desk, you are more likely to achieve a better rate from an ATM machine affliliated with a major bank.
ATM cards are most likely to work without trouble overseas and these are the ones with a four-digit PIN number. Since you may be charged a usage fee by both the local bank and your one at home, it is always advisable to make one large withdrawal instead of several small ones whenever possible. Don’t forget to keep your cash in a safe place out of range of pickpockets etc.
So long as you have a valid PIN number, you can use the credit or debit card to get cash abroad.
Having a credit card is very invaluable when travelling. With one, it will not be necessary to carry large sums of money. It is best to use a credit card rather than cash to pay for larger expenses, like hotel bills and big purchases for instance, then you can get a valid receipt for the transactions. Then if you are unfortunate enough to have a bill disputed, your credit card company should be able to help you settle the matter when you arrive back home.
Do bear in mind that credit card companies will possibly levy an additional fee for overseas usage. If you’re not certain about this then it is wise to check with your company before you leave home.
Quite often you will find that you have some foreign currency left over when you return home. These are a few ideas as to what you can do with it:
• Treat yourself or friends and family with a few gifts at the duty free shop
• Give a donation to a charity. Find a place to do this at the airport or send it to an organisation which deals specifically with charity currency exchange
• Change it back to your own currency at the airport
• Exchange your money on your return home