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Old 16-09-2008, 15:36   #1
Kevin
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Question US interest rate cut...Any effect on £ - $ rate?

With the (probable) US interest rate cut set for this evening in the US, can someone (who knows about these things) tell me whether this is a good thing or a bad thing if I want to buy some $US dollars?

I was looking to purchase $2000 US dollars, currently at $1.75 - £1, but after any US rate cut, would this normally improve or fall?

I realise that these are far from normal circumstances, but I would hate to buy them now and find the rate shoots up to, say, $1.85 over the next week, or conversely, I would hate to leave it and find the rate plummets to $1.6 next week.

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Kevin.
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Old 16-09-2008, 15:45   #2
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On such a small amount does it really matter...?
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Old 16-09-2008, 16:00   #3
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Keeping it very simple, an increase in interest rate tends to make the currency more attractive as an investment and thus can lead to its value getting a bit higher on the currency markets. A fall will tend to have the contrary effect.

Considering how low interest rates are in the US and how many other factors currently influence investment over there, I don't think it will make much of a difference at all. If the dollar rises or fall, it will most likely be because of other, more relevant, factors right now.

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Old 16-09-2008, 16:10   #4
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Hedge yourself like all good financiers and get one of those Nationwide or Abbey cards with zero interest.
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Old 16-09-2008, 16:20   #5
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The market usually already has factored in a known interest rate change, it's often only unpredictable things that cause issues, such as bad economic data being released. Ex rate has weakened against the dollar today a little bit. Down to 1.7789 at the moment
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Old 16-09-2008, 16:34   #6
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Quote:
Originally Posted by Bapapapa View Post
On such a small amount does it really matter...?
He's Scottish

I picked up £1100 in $s a month or so ago, expecting the rate to drop even quicker than it has. I did OK at $1.80 but we're only really talking a few £s difference on the total anyway. It's psychological though isn't it - Everyone wants the best rate they can get even if the difference is pennies.
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Old 16-09-2008, 16:44   #7
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He's Scottish

I picked up £1100 in $s a month or so ago, expecting the rate to drop even quicker than it has. I did OK at $1.80 but we're only really talking a few £s difference on the total anyway. It's psychological though isn't it - Everyone wants the best rate they can get even if the difference is pennies.
Im hoping it gets back up near $2.00 - £1.00 for when i go to new york at xmas
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Old 16-09-2008, 17:02   #8
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Im hoping it gets back up near $2.00 - £1.00 for when i go to new york at xmas
You'll be lucky.
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Old 16-09-2008, 17:32   #9
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Stop moaning...the drop in the pound against the dollar recently has cost my dad £8000. When you've lost that sort of money due to interest rate fluctuations, you have the right to moan.
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Old 16-09-2008, 17:35   #10
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Quote:
Originally Posted by BigPappa View Post
Hedge yourself like all good financiers and get one of those Nationwide or Abbey cards with zero interest.
I assume you mean a card that doesn't cream you for 2.75% for foreign transactions.

If so, add the Post Office CC to the list.
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Old 16-09-2008, 18:43   #11
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No cut.
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Old 16-09-2008, 21:49   #12
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Guys these threads are so pointless honestly, a 25 basis point cut alters the exchange rate by like 0.001 of a penny, unless you are going on holiday with £100,000,000 i wouldnt worry too much about when to change to dollars.

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Old 17-09-2008, 12:48   #13
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Quote:
Originally Posted by Sammy709Sony930 View Post
I assume you mean a card that doesn't cream you for 2.75% for foreign transactions.

If so, add the Post Office CC to the list.
The Nationwide cards exchange at the VISA rate which is virtually identical to the proper exchange rate. Some card also charge a conversion charge like you mention.

The PO cards don't exchange at the proper exchange rate though does it?

That's generally why the nationwide cards are the best and only ones to have when abroad. No fee, No conversion charges or anything.
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Old 17-09-2008, 13:04   #14
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I think the PO credit card acts in the same way as nationwide
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Old 17-09-2008, 14:02   #15
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Post Office card is a very good choice
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Old 17-09-2008, 14:37   #16
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I think the PO credit card acts in the same way as nationwide
So it does.

The debit card however doesn't charge cash withdrawl interest.
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Old 17-09-2008, 15:14   #17
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Originally Posted by hardtofin View Post
Guys these threads are so pointless honestly, a 25 basis point cut alters the exchange rate by like 0.001 of a penny, unless you are going on holiday with £100,000,000 i wouldnt worry too much about when to change to dollars.

hardtofin
It's not about the interest rate change directly affecting the rate, but the impact it will have on trades. As someone mentioned before, if the US cut their rates, its likely the USD will decrease in value so the GBP will get stronger as people move their money away from USD as it doesn't make as much interest anymore. Conversely if the Bank of England raised UK rates then people would buy more GBP as they'd get more money just from interest.

A 0.25 rate change isn't likely to make much difference on any conversion below $10,000 though, so I wouldn't worry about it.

Last edited by Tastydirt; 17-09-2008 at 15:15.
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Old 17-09-2008, 17:47   #18
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Quote:
Originally Posted by Tastydirt View Post
It's not about the interest rate change directly affecting the rate, but the impact it will have on trades. As someone mentioned before, if the US cut their rates, its likely the USD will decrease in value so the GBP will get stronger as people move their money away from USD as it doesn't make as much interest anymore. Conversely if the Bank of England raised UK rates then people would buy more GBP as they'd get more money just from interest.

A 0.25 rate change isn't likely to make much difference on any conversion below $10,000 though, so I wouldn't worry about it.
errrrr, thats what i said?
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