Expert: Steve Hach - 12/1/2010

Question

Hello,

I'm not sure if my question belongs to this category, since I'm a total beginner in finances and currency exchange.

At this point many people have realized how cheap the US dollar is, so I was thinking about buying lots of dollars so when the value of the dollar goes up I can use the dollars I bought in order to use it later when I travel abroad.

What is your opinion about such strategy?

Is there any good source (website, book or magazine) where I can get reliable forecasts of the US dollar?

Thanks,

Regards,

Jay K.

Answer
Hi Jay,

in general Forex--foreign exchange trading, arbitrage--which is what you are proposing, is a really bad idea for individual investors.

I can't think of a more risky venture for an amateur--except maybe some of the put and call options trading.

You really have no idea where the dollar is headed, nor do you have an idea where the other currencies are headed--do you even know where you will be travelling?

Anybody that claims to have reliable forecasts of such things would not be selling them in a book, they would using them to get rich.

Of course, at this time there still seems to be no real altrernative to the dollar, it is the currency of last resort--except perhaps for drug dealers, I read recently that they seem to prefer the euro of late because it comes in a 500 euro note and this makes it easier for them to move cash.

So, my suggestion for you is to save your dollars in the bank or a CD for your vacation and worry about the rates when you book your trip.  

If you find the dollar is weak against the euro, or vice versa, that can impact your travel plans when you are ready to take a trip.

Best,

Steve