dunroving

Yes, I know, the same old nugget that comes up now and again.

The dollar seems to be slowly but steadily strengthening against the pound over the past few weeks (high $1.60's to high $1.50's) and I was wondering if any economics smarty-pants have an opinion on whether this is an ongoing trend and what is contributing to this trend (I've given up trying to figure out the relationship between exchange rates and current economic news).

I still have much of my savings sitting in USD and have said I'll exchange it when the dollar/pound gets to $1.50 (it's been there before), but wonder whether I'm just waiting for something that won't ever happen. It's been closer to the $1.80-$2.00 range for much of the past 5 years and part of me says just get it over with and convert it, but I don't need the money desperately and it's not losing me anything just sitting there, so the genie on the other shoulder says it will be below $1.50 again sooner or later.

Any crystal ball-readers out there?

avanutria

It was $1.50 to the pound in 2010 when we moved our money to buy our house. Unfortunately, it was being moved to the US. We ended up moving it at the WORST moment in recent exchange history, but we had to do it then to get the house we wanted.

Have you calculated out how much more you would get for moving it at a better rate rather than today's rate? Depending on how much you have in savings it may be less than you think, and you might earn it back through interest rates in UK savings accounts - I would hope they're not worse than the dismal ones in the US at the moment...

Brat1

I'm sure when we moved last February, it was down to something ridiculous like $1.37 or something like that, just at the time we were exchanging a good lot of British money. I also remember a couple of years ago, when we were on holiday in Florida, that it was in the high $1.80's, so I have no idea what causes the up and down and how the economy affects the rate. It really is a guessing game I think and one of those things that you take the chance.

HumphreyC

I'm expecting that the pound will continue to decline against the dollar for a while - hence I am holding off on transferring some dollars into pounds. There are a couple of reasons for this - firstly it looks like the UK economy is slowing down to the extent that additional monetary stimulus will be applied. It used to be you had a least a few hawks like Andrew Sentance on the Bank of England's Monetary Policy Committee but since he moved on there is no-one pushing to raise interest rates which would strengthen the pound - especially now everyone is talking about a double dip recession.

Secondly the dollar is seen as a safe haven in times of economic turmoil and with the euro-disaster unfolding with the imminent Greek default it looks like that will cause the dollar to strengthen.

That said - it's a bit of a guessing game. A run of good data for the UK economy and the announcement of quantitative easing in the U.S would cause things to go in the other direction.

Give it a week and it'll probably be at that. If Vince Cable and other government figures keep talking about another round of QE then the speculators will drive it lower.

TimberHut

'they' (who the hell 'they' are I don't know) say that it's natural rate in the current climate is around $1.60 to the pound.

http://www.x-rates.com/d/USD/GBP/hist2011.html

is a good site to see historic data and 1.60 seems about right.

It is steaming down towards 1.50 in the last few days. You need a bit of luck when it comes to transferring. If it hits 1.50 and you don't do it (because you hope it goes towards 1.40) then sods law is that it goes back towards 1.60.

Any expert who says what it is going to do is probably speaking out their jacksie. 'those who know, don't speak - those who speak, don't know' is a good thing to remember here. Of course some of them will get it right but so could 25% of posters on here if we all had a guess as to the trend it is going to take.

On Xmas Day 2011 I predict the rate will be $1.63 to the pound. As I'm such a nice bloke I will publish this information for free.

Macca67

It's a fallacy to say you're not losing anything. With inflation rates running around 4% and a return on your savings - assuming they're sitting in a bank, at probably under 1%, your money is decreasing in value significantly.

As others have commented it's a risky business trying to predict where currencies will land, however you should be able to factor in some known variables and assumptions to hazard an educated guess. The major things I would be taking into account are:

- In the short term what is likely to happen with the Euro - the other major reserve currency, and the sovereign debt crises of the PIIGS and their likelihood of default. Keep in mind the UK is unusually exposed to Irish debt.

- Will the BoE fire up the presses for another round of QE to kickstart the UK economy. Yesterday's MPC minutes suggest this is a policy direction gaining more strength and if implemented the value pound will fall in relation to other currencies.

- What additional measures will the US Fed take.

In trading yesterday I think the pound hit a 12 month low around $1.525-ish, pretty close to your $1.50 number - which if it was a target I'd previously set would make me think very hard about bailing out my savings.

dunroving

I meant I'm not losing anything by keeping it in dollars, compared to changing it to pounds - savings interest rates in both countries are about the same at the moment.

Does anyone know if you can set up a "stop loss" (not sure if that's the right term) on XE.com? I mean an instruction that if the exchange rate hits X, then make the exchange (a little like setting up a stock sale if the stock value hits X).

It took me a while to get my cash into a British-based US dollar account last year (around the time the dollar went to about $1.40 to the pound, so I missed the boat to exchange at the time). I don't have the time to check exchange rates every day once the new semester starts and I wouldn't want to miss the boat. I'd be happy to exchange at $1.50, even if it ended up going even lower afterwards.

Bob

Pull the trigger when ever you get sick of waiting or whenever you need the cash.

The rate will always be significantly better the day afterwards, it is meant to piss you off

fromthemanorborn

I was in a similar situation last year where I had no immediate need to transfer. After a recommendation from someone on here I set up an account with World First and they send out an email when the rate hits your target exchange rate. There is no obligation to make a trade but saves you having to check day in day out. They were very professional and efficient when I did make the exchange and as far as I could tell, no one offered a better rate at the time.

avanutria

The day after I made my last trade, the downgrade of US credit was officially announced. I was sure I'd missed a great rate but I actually was better off trading when I did than if I had waited till the Monday.

First time that that's happened!