Australian dollar: Why it’s time to put currencies back on your radar

Discussions about dollars and other currencies were once common but have disappeared during Covid. They’re coming back.

If you’re like me and a majority of Australians, you probably haven’t thought much about the Aussie dollar over the past 18 months.

With most international travel banned because of Covid, once-common chats about currency movements among co-workers and friends have disappeared.

Before Covid, Australians took more than 10 million overseas trips each year. Now it’s generally only a fortunate or wealthy few who fly internationally.

But with Qantas last week unveiling international flights starting in December to London, LA, Singapore, Tokyo and Vancouver, travel is back on people’s radars.

The new flights might cost up to twice as much as pre-Covid fares, which will sharpen people’s focus on travel finances – and part of that is buying foreign currency.

The good news is our dollar is much higher than the US58c it was worth in March 2020.

It’s currently trading near US73c and reached US80c earlier this year before global growth concerns and the Delta outbreaks slapped it down a bit.

International travel is set to resume, which means dollar discussions will become common.

AMP Capital chief economist Shane Oliver expects the Aussie dollar will climb back to US80-85c over the next 12 months thanks to strong global growth and higher commodity prices, but notes that “currency forecasting is hard to get right”.

A higher dollar is good news for travellers heading overseas but bad for our exporters because they get less money for their products. At current levels our dollar is at a fair value, Dr Oliver says, but it rarely spends much time there thanks to cyclical swings in currencies and countries.

Nobody expects our dollar to climb back to the glorious levels – for travellers, at least – of $US1.11 a decade ago. But it could be higher in six or 12 months just as travellers take off.

For people whose travel plans have been locked down along with the rest their lives, now is a good time for a quick refresher on buying foreign currencies.

SHOP AROUND

There are several ways to buy online or in person through banks and foreign exchange providers, and the rates can vary widely. Pre-loaded travel cards are popular among many people, but I’ve personally preferred a mixture of cash, Visa debit card and American Express.

When buying foreign cash, avoid airports outlets because they typically charge the most. Beware of “no fees” sales pitches because providers will profit from you somehow, and check prices at smaller currency exchanges because they are often lower.

DON’T STRESS ABOUT SMALL SWINGS

Currencies have frustrating fluctuations, which mess with the minds of many people planning international holidays. But it really shouldn’t. If you calculate the actual cost to you of buying a foreign currency for a few cents more than it cost a month earlier, it’s probably a tiny percentage of your entire holiday budget.

SPREAD YOUR PURCHASES

Space out your pre-trip spending at different times. Many people do this automatically by paying for accommodation and flights months in advance, then tours and other bookings weeks before leaving, and finally grabbing cash in the final days.

This strategy smooths out the exchange rates paid.

TEAM UP

Ask family and friends where they get their currencies and why.

And remember that some providers offer better rates for larger amounts, so consider combining your purchases with your fellow travellers.

Originally published as Australian dollar: Why it’s time to put currencies back on your radar