Sending money back to Ireland

Noo

So I dont have any great knowledge of financial economic stuff so just looking for thoughts. Gonna be moving back to ireland in the next year or two and have a good chunk of savings from my time here in oz. Is the euro expected to pick up compared to aussie dollar, as in would it be worth my while to start sending some savings home now rather then doing all when I leave and lose out on the exchange rate?

aido79

Noo wrote: »

So I dont have any great knowledge of financial economic stuff so just looking for thoughts. Gonna be moving back to ireland in the next year or two and have a good chunk of savings from my time here in oz. Is the euro expected to pick up compared to aussie dollar, as in would it be worth my while to start sending some savings home now rather then doing all when I leave and lose out on the exchange rate?

If someone could answer that question they'd be a fool to still be working in a full-time job. It's impossible to know what way the euro and dollar will go next week let alone 2 years time. Even people who deal with this kind of stuff for a living get it wrong all the time.

Noo

aido79 wrote: »

If someone could answer that question they'd be a fool to still be working in a full-time job. It's impossible to know what way the euro and dollar will go next week let alone 2 years time. Even people who deal with this kind of stuff for a living get it wrong all the time.

That's true, I guess it'll just come down to taking a chance on it.

Peregrinus

Usual advice is to send your money back in a few chunks between now and your intended return date. That way you will tend to get, on the whole, something a bit above the average exchange rate over the period.

Noo

Peregrinus wrote: »

Usual advice is to send your money back in a few chunks between now and your intended return date. That way you will tend to get, on the whole, something a bit above the average exchange rate over the period.

Yeah I think that'll be the plan, cheers!

catbear

The current trend seems to be any bad news from Greece weakening the euro (good for sending home) alternated by more falls in commodity price which weaken the Aussie $ (bad for sending home).
So Greece news=good, commodity falls=bad!

Mellor

Peregrinus wrote: »

Usual advice is to send your money back in a few chunks between now and your intended return date. That way you will tend to get, on the whole, something a bit above the average exchange rate over the period.

I don't see how that would be true.
The more pieces you divide it into, you'll get a rate closer to the average. but it's just as likely to be below as it is to be above.

Also, the more pieces to break it into, the more fees hit you.

Peregrinus

Mellor wrote: »

I don't see how that would be true.
The more pieces you divide it into, you'll get a rate closer to the average. but it's just as likely to be below as it is to be above.

You’d think so, wouldn’t you? But, actually, no.

Suppose you have AUD 300 to convert to euros over the next six months. You divide them into three sums of AUD 100 each, and convert them one today, one in three months and one in six months.

OK. Suppose today you get a rate (after commission, etc) of AUD 1 = EUR 0.70, so you end up with EUR 70. In three months’ time the dollar has risen by 10% to AUD 1 = EUR 0.77, so you end up with EUR 77. By the end of the period the dollar has risen by a further 10%, to AUD 1 = EUR 0.847, and you end up with EUR 84.70.

Your total, obviously, is EUR 70 + 77 + 84.7 = EUR 231.70. Since you started out with AUD 300, this gives you an average exchange rate of AUD 1 = EUR 0.77233.

Note that this is higher than the median of the three exchange rates at which you actually dealt, which was AUD 1 = EUR 0.77.

How has this miracle been accomplished? The reason is that, when the Aussie dollar is stronger, you get more euros for it. So, though you divided your Aussie dollars into three equal sums and bought three sums of euros with them, you did not buy three equal sums of euros. Of the euros you now hold, more were bought on dates when the dollar was stronger than on dates when it was weaker. Hence, the average rate at which you bought these euros is higher than the median of the rates that prevailed on the dates you chose to change money.

In this example the Aussie dollar has been strengthening against the Euro over the period, but that is not important. The result would be the same if the order of the dates were reversed; you would still get more euros on the dates when the dollar was strongest. And the same is true if the dollar goes down, then up, over the period, or vice versa.

Admittedly, the difference is small. In this example, on an amount of AUD 300, you have only beaten the median exchange rate by EUR 0.70. Obviously, on an amount of 10,000 or 20,000 dollars, your margin of advantage will be correspondingly greater, but still fairly small potatoes. The real advantage of this system is that, by not trying to predict which day over the six-month period will give you the best exchange rate, which is impossible and leaves you with a real risk of getting one of the worst rates over the period, you can instead reliably target a rate which is (fractionally better than) the average exchange rate over the period.

Mellor wrote: »

Also, the more pieces to break it into, the more fees hit you.

That could be true; it depends on the fee structure you get. Usually it's a percentage of the amount changed, subject to a fixed minimum fee. So long as you are changing enough each time that you are not caught by the fixed minimum fee, though, you don't run up extra costs by breaking a large sum into several reasonable-sized sums.

Mellor

There's a pretty glaring mistake with your maths there.

Peregrinus wrote: »

Your total, obviously, is EUR 70 + 77 + 84.7 = EUR 231.70. Since you started out with AUD 300, this gives you an average exchange rate of AUD 1 = EUR 0.77233.

Note that this is higher than the median of the three exchange rates at which you actually dealt, which was AUD 1 = EUR 0.77.

There's the flaw in your maths. You are comparing it to the median, which is a bit silly. It's a useless number in that regard. The only reason it works here is because you've picked numbers were the middle number is closer to the bottom one.
What is the increases were spread differently? Say you got rates of .70, .77 and .78
Average rate over the three would have been .75, which is below the median of .77
In which case, the rate you get is significantly below the median.

The actual average of the 3 rates is 0.77233, which is the exactly same as the average rate you got. How could it not be? You are averaging the same numbers.

What you actually said was it would beat the average over the whole period, which we can;t work out.

How has this miracle been accomplished? The reason is that, when the Aussie dollar is stronger, you get more euros for it. So, though you divided your Aussie dollars into three equal sums and bought three sums of euros with them, you did not buy three equal sums of euros.

That's irrelevant tbh.
The euros are exactly portional to the rates, if the rates were equally spaced (70/77/84) then the euros would be too and the average rate be be 77, which is equal to both the mean/average and median.

In this example the Aussie dollar has been strengthening against the Euro over the period, but that is not important. The result would be the same if the order of the dates were reversed; you would still get more euros on the dates when the dollar was strongest. And the same is true if the dollar goes down, then up, over the period, or vice versa.

You think so?
Start with a rate of 77 and decrese it twice by 10% and see how it goes.

The real advantage of this system is that, by not trying to predict which day over the six-month period will give you the best exchange rate, which is impossible and leaves you with a real risk of getting one of the worst rates over the period, you can instead reliably target a rate which is (fractionally better than) the average exchange rate over the period.

From the numbers you gave, we don't know the average over the period, which was changing daily.
We haven't even beat the average of the 3 numbers you gave.

acb

Over the last 3 months as we prepared to come home I transferred our money using currency fair. I really like the market place they have..where you can pop in your desired exchange rate and if it hits it during the night, it'll match automatically.

Instead of moving it all in one go, how about moving it in smaller amounts regularly and that way you'll hopefully even out your average rate.
I became obsessed wit it and glad we have it all moved now. You start worrying about things like the Greek economy or the mining industry in Australia and what will happen your rate!