Believe it or not, there is a best and a worst time to travel. No, not due to the weather, the season, or when someone has accrued enough personal time at work to take a break, but rather, a best time financially to travel and explore the world.
The conditions that make for the best time to travel from a financial stand point can get very in depth, so here we will try to break it down into simple components.
If someone is taking a trip out of the country, say for instance from the United States to Greece, they would want to get the most bang for their buck. In order to do this, they want the United States dollar to be as highly valued as possible when compared to Greece’s currency (the Euro). Simple concept, right?
Well, it gets a bit more complex than that. Many factors can change the relationship between the value of the US Dollar and the Euro. For example, if the United States government decides more dollars need to be printed and circulated through the economy, the value of the dollar will decrease because there are more dollars.
The opposite occurs when the US wants less dollars to be in circulation, therein taking dollars out of the economy and increasing the value of the dollar because there are less of them. Like diamonds, the rarer the dollar, the more valuable it is in comparison to other currencies. Travelers going from the United States to a foreign country want the dollar to be as powerful and as valuable as it can be so that they can use their dollars to buy more of their destination country’s currency, effectively giving them “more bang for their buck”.
Other things that could cause a change in the amount of foreign currency one can purchase is the conditions of the destination country. In our example, the traveler is going from the United States to Greece. The Greek government has a very high volume of debt obligations, leading to extremely poor economic conditions right now in Greece.
This means that the American traveler has a prime opportunity – all else equal – to get great “bang for their buck” using USD to buy euros in Greece because the average cost of goods in Greece will be less due to poor economic conditions. Hotels, food, and transportation will all cost less than it would on average if someone was to visit Greece before these poor economic conditions began taking shape.
While there are several other factors that contribute and work together to determine how much foreign currency can be bought with the traveler’s home currency, it is important to understand how the world can influence the prices when going to buy currency. This is why it is important to keep track of currency exchange rates, and pay close attention to the conditions of the destination country. This will lead to the best financial decision when it comes to timing a trip to international destinations in the future.