5 things you should know about forex rates if you are planning to buy currency for your holiday abroad

Have you ever wondered why you have to struggle to get the best foreign exchange rates each time you travel abroad? Why are the rates not fixed and vary from one vendor to another? These are good enough reasons that compel any customer to seek rates from multiple vendors before buying/selling forex, as there are chances of getting better rates.

Well, there are factors that control the foreign currency rates and you should know them in order to get a “better rate” without much hassle the next time you fly abroad.  

1.      Currency exchange rates keep fluctuating through the day

An exchange rate is the rate at which one nation's currency can be exchanged for that of another and it depends on many factors such as balance of trade, imports and exports, the prevailing interest rate in the country, relative Inflation and other national/international affairs. Therefore as the parameters keep changing, the currency rate fluctuates throughout the day, just like the stock market every few seconds. While some forex companies would quote the LIVE rate for forex, most of the banks and foreign exchange stores have one rate for the day for all currencies, and here’s the catch! Buying at live rates is a good idea since you have the freedom to buy, sell or remit forex when the exchange rate seems suitable to you rather than being compelled to transact at the ‘daily rate’ being offered.

2.      Season impacts currency rates

Come winters and people flock to destinations like Thailand, Dubai, etc., resulting in higher purchase of currencies like UAE Dirhams, Thai Bhat etc. As a result, these currencies are available at very high premiums in the winters. On the other hand, in the summers, very few NRIs or foreigners visit India, while many Indians travel overseas and hence most currencies are sold at higher premiums in the summer months and on discount in winters when the situation reverses. You can keep this factor in mind when planning your forex purchase. RBI allows you to purchase currency 60 days before your travel date. However you should have your travel documents in place. 

3.      Demand & supply game

The most common supply of foreign currencies in India is via inbound travelers who bring foreign currency with them. There are many foreigners, NRIs and returning Indian visitors that bring large amounts of common currencies such as US Dollars, Euros, UK Pounds etc. and hence there is a much better supply of these currencies in India as opposed to the Thai Baht, UAE Dirhams, South African Rand etc., where the main supply may only come from returning Indian tourists. Similarly, outbound travel to certain countries such as USA, Europe, Canada is high and that too impacts the rate of cash currencies of these countries.Therefore, most of the time, purchasing USD instead of local currency of countries like Thailand, UAE, South Africa etc. is more beneficial for the travelers. Try out the calculation next time and you’ll thank us for this tip!

4.      Region matters too

We know that the major source of cash currencies is foreigners and NRIs. Further there are specific cities in India where NRIs are settled. For example, there are many NRIs from US, UK and Canada that visit various cities of Punjab, Gujrat and other metros. Similarly there are large numbers of NRIs from Middle East that visit Kerala and other parts of South India.

Hence the cash currency rates for US Dollars, UK Pounds and Canadian Dollars are much lower in Punjab and the rates of cash currencies for UAE Dirhams or Saudi Riyals are lower in Kerala. On the same lines cash currencies are more expensive in cities like Bangalore, Chennai and Mumbai. Purchasing travel cards instead of cash would prove more beneficial to people residing in these locations. 

5.      Forex card rates don’t depend on demand-supply or location

Yes that’s true. Forex rates are dependent on inter-bank rates, i.e, the standard rates at which one bank deals with another bank.  There are no availability issues and the demand/ supply game doesn’t exist at all in forex cards. There are online forex companies offering zero cash withdrawal charges at ATMs in most of the currencies. Forex cards can thus provide sizable savings of 1%-3% of your forex spend.

Since you’re now aware that forex rates keep fluctuating due to various factors, make sure you use the “Better Rate Request”  feature on www.BookMyForex.com to receive a better rate quote on your forex deals. 

Normally, 8 out of 10 times the rate can be improved after reaching out to all their channel partners. Keep your currency purchase to the minimum and use the prepaid travel card for most of your needs abroad. Exchange your currency like a pro when you go abroad next time! 

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