Exchange Rates

[mjd]

I'm traveling to Buenos Aires and Brazil in January 2004. Given that the dollar has been declining against these currencies, I was considering exchanging money now here in the states to protect against further decline.

 

Any advice?

[trilingual]

It's really hard to predict the rates that far off. Also, if you exchange money outside of Brazil or Argentina you're likely to get a very unfavorable rate, plus commissions, so keep that in mind, too!

 

For your consideration: Both the Brazilian real and the Argentine peso seem to have stabilized at close to three to the dollar. My guess is that they will hover around that rate for a while because the two governments consider it a fair reflection of the value of the currencies and also because it's a rate that promotes tourism and sale of their exports.

 

In the past, the real tended to strengthen significantly around the end of the year and through Carnival, because it's the peak tourist season and there are lots of dollars floating around. Once the foreign tourists and their currency go home, the real tends to weaken again, because dollars become more scarce. This year, however, that trend didn't really hold true. However, I can't say if it was a one-time thing, or if the old trend is extinct for good.

 

Even if the real and peso strengthen again towards the end of the year, I think it's very unlikely that they'll be worth more than 2.80 = 1 dollar because that's more or less the "ceiling" the governments don't want the currencies to exceed. It that happens, the central banks are likely to intervene to force the value down again. So if the fluctuation is only in the range of 20 centavos I probably wouldn't lose too much sleep over currency rates, unless you're planning on changing very large sums of money.

 

Something else to keep in mind is that the two currencies strengthened, to some extent, because of the high interest rates in both countries, which attracted foreign depositors looking for short term gains on their capital. The interest rates are starting to come down (even though they're still high) so the two countries become less of a magnet for foreign currencies, which in turn helps weaken the local currencies.

 

Also, even though inflation is relatively well-controlled, both countries still have serious structural problems in their economies that give international investors pause. Until those problems are resolved, the two currencies aren't likely to strengthen significantly.

 

I guess I'd say that if you're in Brazil and Argentina where you can change money locally, and you can get at least 3 (and perhaps more) for the dollar, it's probably not a bad idea to change money now. If you're getting less than 3 to the dollar, it's probably not worth the time and effort, unless, as I said before, you're talking about very large sums.

 

Hope this helps you make up your mind! If you do exchange money now and aren't satisfied with the outcome in January, I take no responsibility! When it comes to currency trading, it's always, and strictly, AYOR!!!

[Guest YFSC]

>I'm traveling to Buenos Aires and Brazil in January 2004.

>Given that the dollar has been declining against these

>currencies, I was considering exchanging money now here in the

>states to protect against further decline.

>

>Any advice?

 

In general you get a very poor exchange rate anywhere in the US.

 

There's little demand for foreign currency here and the banks, etc, don't like handling all that "funny money." Overseas, on the other hand, there is a big demand for dollars because of the dollar's status as the major international currency and its perceived stability, and so the rate is better.

 

You are almost always better advised to do your exchanging abroad, no matter what the country, unless you have reason to think that there will be a significant drop in the dollar before you get to where you are going.

[Guest BottomBoyRandy8]

At one time in my life I had enough worthless currency from a few Latin American Countries that I could wallpaper a bedroom. Peruvian Soles, Ecuadorian Sucres, Chilean Escudos, and on and on.

Fortunately I never got hit too hard at once and I think the worst loss in one day was only about $300USD.

My advise to you would be that unless you want to get stuck with a pile of worthless bills do as most people do in Latin America, hang on to a sure thing, US Dollars, and exchange when you are ready to spend.

Just returned from Argentina and Brazil and I found that in Argentina many businesses were asking for US dollars and would give a price break if you paid with our green ones.

[+ Axiom2001]

Currently, the Brasilian real tends to be holding its own; last October the rate was 4.0 reais to one US dollar. It's much different right now. I even brought back R$235 when I returned to the US in March of this year. ...will use these plus many more when I journey there again within 24 days from today.

 

I guess it's a matter of how the economy is doing at a particular time in some of the countries south of ours. Our own dollar isn't doing too well in other parts of our world!

[trilingual]

FYI, today's "O Globo" reports that Brazilian futures markets are betting on the Brazilian benchmark SELIC interest rate to be down to 18% (from a high of nearly 26% earlier this year) and the real to be valued at R$3.14 to the dollar by the end of 2003. Only time will tell if these predictions come true! But you heard it here first, unless, of course, you read "O Globo!"

[CT Dick]

> Our own dollar isn't doing

>too well in other parts of our world!

 

Where IS it doing well? It is nearly up to its recent high against the Brazilian real of US$.35. The euro, Canadian dollar, and pound are all up. What happened to the cheap trip? ;(

 

Dick

[trilingual]

Well, even at R$2.80 to the dollar (which is about as strong as I think the real is likely to get before the Brazilian government intervenes to try to weaken it again) a trip to Brazil is still a bargain compared to what it costs an American to visit Europe or the U.K. these days! The R$50 standard escort fee at the saunas equals US$17.85 at the R$2.80 exchange rate, so I think we'll still be able to afford having a good time in Brazil. But when it comes to currency rates, nothing lasts forever, at least not in South America, so enjoy things while the rates are favorable!