Is it time to stockpile US dollars?

Mozo

Wednesday 26 February 2014

News that the Australian dollar could reach 66 cents by the end of next year made headlines around the country this week.

Is it time to stockpile US dollars?

But like all predictions, the call from Deutsche Bank's chief economist for Australia, Adam Boyton, that the Aussie dollar was facing a benign collapse relies on a number of 'ifs'. The plunge would happen "if the Reserve Bank holds interest rates until 2016, if the US lifts its rates by mid-2015, and if the US dollar continues to strengthen."

So what if you are planning an overseas trip in the next 12 - 18 months? Should you start buying up US dollars now and putting it onto a prepaid travel card or setting up a foreign exchange account?

The Australian dollar is currently trading at around 90 US cents. Should the dollar really drop to 66 US cents, it could have a big impact on travel affordability for many Australians. A family with a AUD$5000 travel budget today would get around US$4500 but if the dollar drops to 66 US cents, this would only buy US$3300 - that's $1200 less spending money.

It is certainly a sensible idea while the dollar is strong to start putting some money on a prepaid travel card if you know you are going to travel in the near future, advises Mozo's money experts. But no one really knows what is going to happen so either way (buy now or wait later) you will be taking some risk.

For travellers that do have some money they can afford to put aside now, when choosing a prepaid travel card it is important to look at cards that don't charge for reloads, particularly if you are planning on adding to the card over time. 

To compare rates and fees of major providers of prepaid travel cards head to Mozo.

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