07 January 2011

Watching the rates

It's time for me to transfer some U.S. dollars over to France so that we'll have money to live on for the next six months. Doing the transfer is not complicated, but it is a lot of trouble. I have to set up a transfer with a company that specializes in currency conversions and agree on the exchange rate. Then I have to have my bank in the U.S. wire the dollars to the currency exchange company, which is in London. The London office wires the money as euros on to my bank here in Saint-Aignan (Montrichard, actually) at the agreed-upon rate.

It's important to me to get the best rate I can get for the conversion from U.S. dollars to euros. As a retired person, I'm in a position where every dollar — or euro — counts. And the dollar is weaker than we'd like it to be. For the past few days, I've been watching the exchange rate evolve in favor of the American currency. In other words, just this week the U.S. dollar has gone from being worth 0.74 to 0.77 centimes d'euro (eurocents). In other words, the euro has dropped from $1.34 U.S. to $1.30.

As a hypothetical example, let's say you are having $25,000 U.S. dollars transferred to Europe. If you change the money at $1 = 0.74 €, you end up getting 18,500 euros. If you change the money at a rate of $1 = 0.77 €, you get 19,250 euros. Those 750 extra euros represent a good portion of our everyday expenses for a whole month (groceries, fuel for the car, bread, wine, satellite TV, Internet, etc.). Or a six-month supply of heating oil. Or several years' worth of firewood. A round-trip plane ticket to the U.S. Or, for example, I could buy a nice computer with the extra money. We could go spend a week in a rental apartment in a nice neighborhood in Paris. Or... well, I can dream, can't I?

Remember, the above example is purely hypothetical. Nonetheless, when we bought our house in 2003, that sum, $25,000 U.S., was worth more than 23,000 euros — nearly 4,000 € more than it is worth today. In 2002, it was worth more that 28,000 euros! And a couple of years ago, at the U.S. dollar's low point, it was worth less than 16,000 €. All the while, prices in France, as nearly everywhere, just keep going up. Wild and unpredictable currency fluctuations have been a hard reality of the American (and British) expatriate's life for the past eight years.

When I applied for my future U.S. Social Security benefits the other day, the man I talked to at the American embassy in Paris told me that I can have the monthly payment sent directly to my bank here in France in euros. There is no fee involved for the conversion of the dollars into euros. The only unknown factor is the exchange rate. We won't know from one month to the next how much money will come through when it gets to the bank in euros.

I think I'm going to try it. Having the money paid into a U.S. bank account and then processing the conversion into euros once or twice a year is a big hassle. Something in my head says I'd have more control over the process if I continued doing it that way, however. I'm sure that's just an illusion. There's no need to be a control freak. Exchange rates are like the weather. You can worry about them, and you can talk about them, but really, you can't predict or change them. All you can do is watch... and adapt.


  1. We can do all our transfers entirely online now. It's quick and easy - hardly any more trouble than shuffling money around in the same currency.

  2. Currently in OZ we are enjoying parity with the US which is OK if booking a Paris apartment owned by a US owner. The AUS$ is doing OK with the Euro as well but for a really great value holiday, New Zealand is the place for us with our $ being $1.30 to the NZ$.
    It all depends on where you wopuld rather be at the time.

  3. Flippant, yes, but can't you just go to the Saint-Aignan auto teller machine?

  4. Hi Susan, our currency exchanges are all online now too. But you still have to watch the exchange rates. Or not worry about it, I guess. It's not the moving around of money that's a problem — it's the fluctuations in the value of different currencies.

    Leon, so does that mean the Aussie $ is higher than it used to be? We in the U.S. used to have an advantage with Canada similar to your advantage with NZ. And our U.S. $ used to be much higher against the euro than it is now. Now it's all different. Currencies flood and ebb like tides.

    Andrew, would that it were so simple. We have automatic payments of electricity, internet, satellite TV, and tax bills. So we have to have significant amounts of cash in our bank account. And we need French debit/credit cards and checkbooks. Being a tourist and being a resident are two entirely different things.

  5. Wouldn't it be great if money was NEVER a problem?
    Look at it this way Ken : maybe checking the fluctuation of the mighty $ keeps your brain young.
    I read yesterday that the Canadian $ is a tad above the US $.

  6. So true, Nadège! Money is always a hassle. I guess you're right too about the brain. The old brain. Older and older. Retired. Still churning, though.

  7. Ken

    For the past two or three yrs, the CAN$ has been above parity for a short period.
    Presently that's the case: 1 CAN $ = 1.0031 US $ and I am hoping that it will last longer this time ( or at least until this summer after my vacations in Maine when I take advantage of summer deals from the Outlet stores).
    Some employees who work for the International organizations in Montreal are complaining - they are paid in US $ and at one point when the CAN $ was worth 0.65US , they were on the winning side :-)

  8. Well, I was going to say that I've generally gotten the best exchange rates by just taking money out of an ATM. But of course, you can't take out enough volume to pay bills etc, unless you go every day. And now I see you've already covered this topic with Andrew.

  9. Diogenes, I get a better exchange rate working through a currency exchange company in London. They don't charge any fees, and their rate can't be beat. The minimum transaction, though, is $5000. There are always fees with ATM cards, I believe. My credit union charges 1% on ATM withdrawals in France. And then their rate is always less advantageous than the rate through the company in London. Not to mention the daily limits.

  10. For now, I like that the euro is stronger. But we have one retirement account in the US and when time comes, a strong dollar would be welcome!

  11. The financial gurus that I've been following are forecasting that the Euro will continue to decline vs. the dollar this year. I believe the reasoning is the difficult credit situation throughout Europe isn't getting better and will really start to show this summer. One that I follow and recommend is Jim Jubak. He has his own blog, now, but I first started reading him when he was only on MSN Money. Have a read. He speak in easy-to-understand words but yet is very well educated as an economist. I've had succes over the past 11 years following his advice.

  12. It's back down a bit again.

  13. Mary, thanks for that recommendation. I'll have a look. And thanks for the optimistic view of the currency situation. I would love it if the euro/dollar rate would settle at about 1 euro to 1.25 dollars. And stay stable. The fluctuations are more trouble than the actual rate — within reason, of course.


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