±JOIN OUR NEWSLETTER

Get useful expat articles, health and financial news, social media recommendations and more in your inbox each month - free!



We respect your privacy - we don't spam and you can unsubscribe at any time.

±Compare Expat Providers

Expat Health Insurance Quotes

Foreign Currency Exchange Quotes

International Moving Quotes

We're very social! Follow Expat Focus on Facebook, Twitter, Pinterest and Google+

Expat Focus Facebook PageExpat Focus on TwitterExpat Focus Pinterest PageExpat Focus Google+ Page

Notify me when new content is added about a country

±Expat Focus Partners

Articles

Articles > Financial

Financial

How the US Shutdown Affects Currency Exchange Rates for Expats

  Posted Saturday October 19, 2013 (17:44:51)   (14197 Reads)
Simon Hilton
Simon Hilton

by Simon Hilton, senior foreign exchange consultant at World First and official Expat Focus foreign exchange partner

In the past few months, we’ve seen the strength of the US dollar take a bit of a tumble. At the start of July, USD was up at 0.671 against GBP, but in recent weeks, we’ve seen it fall below 0.61. And it’s not just the pound against which we’ve seen the US dollar struggle, having also lost ground to the Euro and Australian dollar (AUD), amongst others.

Add to that the political deadlock which brought about a US government shutdown, and it’s certainly been an unsettled picture. About 800,000 federal workers in America were told not to go to work while museums, national parks, services and government buildings remained shut in the wake of a lack of consensus over the US budget and the debt ceiling.

So what has this meant for the US dollar? Well, a temporary lack of credibility and a loss of confidence in USD has ensued, creating a feeling of uncertainty and wariness amongst potential investors, which, in some cases, has actually deterred them from investing.

The big worry was that the government would default on its debt, the spectre of which frightened - amongst others - the real estate market, where transactions were cancelled and people were unable to get loans. Had a default occurred, this would have led to great economic uncertainty, and US government bonds would have appeared much less attractive to investors. Interest rates would have risen, and therefore economic activity would have slowed.

With the near-term risk of a sovereign default now gone, we now turn our attention to the extent to which the shutdown has damaged the US economy. The ratings agency Standard & Poor’s say the shutdown has probably taken 0.6% off annualised GDP, equivalent to around $25bn. Going forward, confidence will be the key to future spending. And should the value of the dollar continue to fall as we’ve seen over the past few months, then this will have an effect on UK expats living in America.

For example, if they want to send money back home, whether they’re paying a mortgage, sending wages to a home account or supporting family members, they’ll get fewer pounds for their dollars. At the start of July, $5000 would have got you around £3,350, but by the start of October, this had fallen to around £3,080. The question UK expats are asking is - how much further will it fall?

This is an example of how currency exchange rates can really affect expats. If you’re working abroad and sending money home, retiring overseas and transferring your pension, or making any sort of currency transfer, a country’s political situation is just one of the things that can affect how much you get. Interest rates, inflation rates and government intervention are also factors in influencing the strength of a country’s currency against another.

With so many factors playing a part in deciding how much you’ll get, the way you handle your foreign exchange transfer is all-important. It could be worth hundreds or even thousands of pounds, so it’s definitely worth giving some serious thought to. You can also keep up to date with the very latest market updates and rate alert services from our chief economist, Jeremy Cook.


Simon Hilton is a senior foreign exchange consultant at World First specialising in assisting private clients and companies with their foreign exchange transactions. Simon is authorised by the FSA to offer foreign currency options. Contact Simon today for a free, no-obligation currency transfer quote.

World First transacted over £4.7bn for their 40,000 clients in 2012 and have a 2A1 credit rating from Dun & Bradstreet – the highest possible rating for a company their size. As well as tailored hedging solutions designed to protect you from adverse market movements, they also offer excellent service. Winner of the Client Focus Award at the 2012 National Business Awards, they provide personal service with a dedicated dealer, and a regular transfer service, which is perfect for mortgage or rental payments.


or go to latest articles


 

  Printer Friendly Format
 


Expat Health Insurance Partners


Aetna International

Our award-winning expatriate business provides health benefits to more than 650,000 members worldwide. In addition, we have helped develop world-class health systems for governments, corporations and providers around the world. We want to be the global leader in delivering world-class health solutions, making quality health care more accessible and empowering people to live healthier lives.

Aviva International

Health is your number one priority. At Aviva we understand this, which is why we’re focused on helping you and your family access high quality healthcare at home or overseas. Our award winning medical insurance will help you get the treatment you need or simply provide guidance and advice wherever you are, 24/7.

Bupa Global

At Bupa we have been helping individuals and families live longer, healthier, happier lives for over 60 years. We are trusted by expats in 190 different countries and have links with healthcare organisations throughout the world. So whether you're moving abroad for a change of career or a change of scene, with our international private health insurance you will always be in safe hands.

Cigna International

Cigna has worked in international health insurance for more than 30 years. Today, Cigna has over 71 million customer relationships around the world. Looking after them is an international workforce of 31,000 people, plus a network of over 1 million hospitals, physicians, clinics and health and wellness specialists worldwide, meaning you have easy access to treatment.