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Most economical way of paying off student loan from overseas.
I searched through this subreddit and was surprised to see this hasn't been discussed at much length (or I am bad at searching). I am living overseas in Canada and am being charged 3.5% interest on my student loan balance so I'd like to now start paying it off ASAP. From what I can see there are a number of possible methods for paying off a student loan from overseas:
Exchange service such as Western Union or Transferwise.
Direct debit payments.
I put together a quick table summarizing my options, calculated at 07:00 EDT - 9/8/20. Some things to note:
OFX, OrbitRemit, WU and XE have an agreement with IRD where they don't charge fees for student loan repayments. Transferwise is still cheaper than WU even with fees which goes to show how overinflated the WU exchange rate is.
IRD credit card payments are not supposed to charge the 1.42% convenience fee if you are overseas. I messaged IRD to make sure it definitely would not be charged and they said that it is an error that it shows on the confirmation page and it definitely would not be charged. It was still charged. I messaged them and told them I had been charged 1.42% and they told me it was my bank (it definitely wasn't, but I can't be bothered arguing with them anymore).
I don't believe that FOREX Credit Card payments would be able to earn any sort of rewards but it may be possible to make up for the additional fees this way. It may also be worth the additional fees of using a credit card for someone in Canada or the USA to help build a credit score. For example on a $50,000 loan the difference between using a credit card and OFX (If you could get IRD not to charge the convenience fee) would be about $430 but could potentially increase your credit score significantly.
Credit Card FOREX was calculated using this. I have used a 0% bank fee as I could theoretically get a CC with 0% FOREX from my bank.
Send Amount (CAD)
Recieve Amount (NZD)
CAD Not Available
IRD Convenience fee included (1.42%)
I have a few questions:
The XE website was down, does anyone know if their rate is competitive?
Is there anything else I am missing? I'd like to get it right as I am now going to start aggressively paying down my quite sizable loan and a few percent here and there will make a big difference!
It looks like OFX is the cheapest option, does anyone have an experience with them? I may still just use Transferwise as they are only slightly more expensive (ends up being about $150 extra if I paid off my whole loan) and I have had really good experiences with them in the past.
What would happen if sovereign governments gave bitcoin a gold peg?
This is a totally theoretical post, but I believe it is a really interesting idea and would love to get the Internet's feedback on it, and what you think the ripple effects would be in the scenario described. Am very interested in writing this up and republishing it widely so it can be read by monetary policymakers in all major developed countries - if you know anyone like that, pass it on. In a move that would act like a bridge to a pre-Bretton Woods type of gold peg, (here is a great paper on a history of this in the US: https://fas.org/sgp/crs/misc/R41887.pdf) sovereign governments with gold holdings could (again, it is a theoretical idea - I am saying they COULD do this NOT that anyone or any country is doing this that I know of) establish open market operations to purchase bitcoins (partly as a diversification strategy) using their physical gold holdings at a fixed peg rate of 5 ounces per bitcoin. The reason I say 5 is because the current chart here seems to suggest that somewhat of a convergence to 5 oz is already occurring: https://www.xe.com/currencycharts/?from=XBT&to=XAU&view=10Y If any government did this and offered to buy physically delivered bitcoins from private holders of bitcoin (no other coins just BTC) in exchange for private delivery of physical gold, then the standard governmental unit of physical gold (held in places like Fort Knox) - known as the Good Delivery Bar which is 400oz of gold - could be procured by any holder of 80 or more coins in a secure and sanctioned exchange with the government in question - the most impactful of course would be if the US did this. My theory is that any time the exchange rate mechanisms in the forex or crypto markets violated the peg, there would be arbitrage opportunities that would bring the peg back in line. It would not only stabilize BTC, but the stabilization might spread via the 24/7 exchange rate mechanism in the crypto market to stabilize many cryptos that are still somewhat worthy experimental stores of value. Depending on the strength, credit, and depth of gold holdings of whatever governments engaged in this, it would seem that such a strategy could transform bitcoin into a new type of sound money, and also signal that owning bitcoin and gold is a priority of governments as well as their citizens. The gold standard was powerful both because it was tethered to something of limited quantity in the earth's crust with unique properties, but also because pre-Bretton Woods gold standards acted very much like a peg - and the government honored the peg no matter what. So in some sense it was still the "faith and credit of the government" that made that peg work so famously. I was partly inspired by this recent award-winning documentary www.inmoneywetrust.org in formulating this idea, and partly by my own academic interest in cryptocurrency. I believe bitcoin, above all others, because of its deflationary nature and algorithmically fixed quantity, is powerful all in itself - but with a peg from a real government to a real precious metal that many governments do in fact hoard (for whatever reason) - it could become both an international currency, and a form of truly sound money backed by governments' physical gold reserves and a legal or policy commitment to a peg of 5 ounces to 1 bitcoin. What do you all think would happen if a major government or many major governments did this? Remember the idea is to convince monetary policymakers in governments to willingly and openly bypass completely the fiat currencies of their governments and to make no informational commitment to those free-floating fiat markets for forex - so the bitcoins transacted for in the peg wouldn't be bought with dollars or yen or anything that could be printed by fiat. This would simply be a convertibility guarantee by major governments that 1 bitcoin, transferred to the Treasury by a private citizen or business (again so the Treasury could diversify holdings of sound money), would be convertible and be guaranteed to be convertible to 5 oz of physical, deliverable gold bullion (or 80 bitcoins per bar). Here is a list of the largest physical gold holders on earth who could theoretically engage in this type of operation: https://www.investopedia.com/ask/answers/040715/what-countries-have-largest-gold-reserves.asp Thanks Reddit! Looking forward to your thoughts! Alex Kaufman
Simplest and best way to trade one currency (GBP/TRY)
I have been very interested by the recent fall of the lira and am interested in investing a sizeable portion of my British pounds into the currency for two reasons. The first is a strong hunch the currency was nearing rock bottom and would rebound (perhaps that's already happened and I've missed the boat?). Obviously this is highly speculative but the more important reason is that having spent a few months living in Turkey last year I am interested in buying a property cheaply there. Buying the lira when it's so low would make this a very affordable proposition and guarantee me the opportunity at a 'locked in' rate that works for me. Even if the currency did fall further after buying I would still have this. As I'm new to forex trading my question is, what's the simplest way for me to do this that would give me the best rate (lowest spread)? I am UK based and looking for a platform that is straightforward and simple to use that has the GBP and TRY pair. Forex.com doesn't have this pair and looks complicated for a beginner. Would I be better converting money on something like xe.com which is exceedingly simple? I'm guessing a better spread would be available elsewhere. I'm looking to invest anywhere from £10,000 to £50,000. As I said it's just the one currency I want to trade at the moment (a full initiation into forex trading may follow). If someone could advise I'd greatly appreciate it. Also if there's a flaw in my logic please point it out e.g. The likelihood house prices would rise exponentially with the currency crash.
My experience with Norbit's Gambit [google sheets link included]
Just want to share my experience doing Norbit's Gambit, for anyone that may want to learn on my experience, or tell me all the ways in which I am wrong. I've posted a question earlier, asking how to make sure the market didn't swing in the wrong direction. And yes, I understand it's called a "gambit" for a reason. === TL;DR === - Wanted to save $65 on currency conversion while buying CAD $3,500 worth of US stock - Overestimated forex fee, underestimated NG cost - Murphy happened... - Lost potential gains of CAD $185.80 while waiting - Is the gambit ever worth it? === The goal === - On August 25th, use about CAD $3,500 to buy some US Netflix (NFLX) shares === The method === - Buy DLR in CAD - Call brokerage to journal over to US side - Sell DLR.U in USD - Buy NFLX with USD In a lot of my research, I've been told the "fee" when going through the brokerage (Questrade in my case) is 2%. That's not too accurate. === The brokerage Forex rate/fee === So I assumed 2% of $3,500 would be $70. However it's really an addition of 199 basis points to the exchange rate. I believe they use the closing exchange rate on the date of the transaction. So if the exchange was 1.2500, it's 1.2699, and $CAD 1000 nets $USD 787.46 ($USD 12.54 short of ideal $USD 800). If we convert 12.54 to CAD, it's $CAD 15.68 or 1.568% on the original $CAD 1000. But if the exchange is 1.2200, it's 1.2399, and $CAD 1000 nets $USD 806.51 ($USD 13.16 short of ideal $USD 819.67). If we convert 13.16 to CAD, it's $CAD 16.06 of 1.606% of the original $CAD 1000 The "conversion fee" is dependent on the exchange rate, but I can't figure out a quick direct way to calculate what the "fee" would be in source currency %. The closest guesstimate is to divide the basis points by the current exchange rate, as below:
In first example, 0.0199 / 1.25 = 0.0159 or 1.59%
In second example, 0.0199 / 1.22 = 0.0163 or 1.63%
On August 25th, the exchange rate was 1.2483. So the above guesstimate for the Forex "fee" would be $55.80. Or more accurately $54.91, close enough. Still, that's 21.5% lower than the broad *$70** estimate earlier.* === The NG effective fee === Here once again, the common consensus is that the NG's fee is just a cost of buying and selling an ETF. So, with QT's free ETF purchases, the guesstimate is just about $5 for the selling commission. When I bought DLR ETF on August 25th, I got it for CAD $12.42 per share (that's not the day's close price, but what I actually paid). the US side of DLR.U is always US $9.93. The gives the DLR Exchange Rate of 1.2508... already different from the ideal 1.2483 (I suppose that's how the ETF makes money)
CAD $3,502.44 buys 282 whole shares of DLR (I will address the extra $2.44 later)
No buying comm, but ECN of CAD $0.0035 * 282 = $0.99
Selling comm and ECN: US $0.99 + $4.95 = $5.94
So, it would appear the cost/fee of NG is just CAD $0.99 + US $5.94 (CAD $8.40)... but not quite. Let's look as the actual US dollar amounts. Since we can only buy whole shares of DLR + ECN fee, from this point I am converting CAD $3,502.44 + $0.99 = $3,503.43
Ideally, with exchange of 1.2483, CAD $3,503.43 nets US $2,806.56
I paid CAD $3,503.43 to buy 282 DLR shares
I sold DLR @9.93 for US $2,800.26
Less US $5.94 comm+ENC leaves me with actual cash of US $2,794.32
The difference between the ideal US $amount and what I am left with is the "fee" for doing NG. US $12.24, or CAD $15.28. This sets the NG's Effective Exchange Rate as 1.2538 or a "NG's fee" of 0.44%. Please note that this rate/fee is *based on the converted amount*: the more you convert, the less/cheaper it is. So comparing the actual cost of NG vs QT's auto conversion and the guesstimates is quite different - Actual $15.28 vs $54.91 ($39.63 spread) - Guesstimate $5 vs $70 ($65 spread) === The Time factor === Now that I have US $2,794.32, let's buy some NFLX. The date now is Sept 5th (yes, the NG completed earlier, but I am human... also QT didn't call me when the journaling was completed so I got sidetracked). Before doing the NG, I calculated that NFLX dropped about 2.02% in 10 days. It could also go up by same amount. That 2.02% rise on CAD $3,500 value would be a gain of $70.7... comparable to $65 guesstimate loss of doing currency auto-conversion through QT (QTAC). So in my analysis, at worth case it would be a wash, in best case I save some money on NG. ... We already know now that the actual cost of QTAC is much less ....
On September 5th, NFLX traded (at time of my purchase) at $178.79
That's a 6.74% increase of August 25th's price of $167.50 (at the time of me recording the price)
US $2,794.32 buys 15 whole shares for $2,681.85 + $4.95 Comm = US $2,686.80 spent. [Weirdly enough I had no US ECN fees in spite of doing odd lot market orders]
This leaves US $107.52 in cash
Total US Portfolio value (cash + NFLX value) $107.52 + $2,681.85 = $2,789.37
This was the end result of my NG: spent CAD $3,503.43 and 11 days later I have a US stock+cash Portfolio of value US $2,789.37 But considering the increase in NFLX stock over those 11 days, what if I would have just went with Questrade's Auto-conversion (QTAC) route?
QTAC exchange rate on August 25th, 1.2483 + 0.0199 = 1.2682
CAD $3,503.43 will net US $2,762.52
That would buy 16 whole NFLX shares @167.50 for US $2,680 + $4.95 comm
Total spent US $2,684.95 and left with $77.57 cash
Cash + NFLX Portfolio value US $2,757.57
In 11 days, the value of NFLX is @178.79 - Current value of 16 NFLX shares = US $2,860.64 - Plus cash US $77.57 for a Total Portfolio Value of US $2,938.21 If, on August 25th, I would have auto converted currency with QT and bought NFLX, I would have a portfolio value of US $2,938.21 on September 5th. Instead, starting the Norbit's Gambit on August 25th, I bought NFLX on Sept 5th and have a portfolio value of US $2,789.37 Instead of saving a guesstimate of CAD $65, I have lost potential gains of US $148.84 or CAD $185.80 === Murphy... or Loonie... whatever === In all of above, I tried to keep the currency fluctuations isolated. So apart from initial conversion on August 25th, all my future (September 5th) portfolio values were in USD. But as Murphy would have it, the BoC rate announcement made the loonie stronger in between my NG.
On September 5th, the ideal exchange rate jumped to 1.2235
DLDLR.U had a somewhat delayed reaction, and was almost same at 1.2236
Based on above, doing QT auto-conversion - On August 25th, nets US $2,762.52 - On September 5th, nets US $2,817.62 I would have got US $55.10 more just by doing the QTAC later. If I would have bought NFLX on September 5th after doing QTAC - 15 whole shares @178.79 + $4.95 comm leaves me with US $130.82 in cash - Total NFLX + Cash portfolio value of US $2,812.67 That's still US $23.30 more than doing the NG, although still less than just buying NFLX outright on August 25th and letting it grow. === Final conclusion === Smaller amount (CAD $3,500) for NG for a stock purchase that could/did swing 6% was not worth it. Loonie getting stronger also made the whole exercise fruitless, but even eliminating the currency fluctuation, the growth of the stock outperformed the savings of NG. Playing with my numbers, assuming the currency fluctuation is fixed, for CAD $3,500, doing Norbit's Gambit vs Questrade's Auto-Conversion is breaking even when the stock appreciation is no more than 1.18% during the time it takes to complete NG (11 days in my case). Even if you are more punctual and can complete it in 5 days, you still need to make sure the stock doesn't appreciate more than 1.18% in 5 days. By comparison, if converting CAD $10,000, it's break even if stock rises 1.27% during that time. When doing CAD $50,000 then 1.31% Hmm.... so even at high amounts of CAD $50,000 the tolerance to stock fluctuation is pretty low. So is it worth it? Ultimately I've:
Best exchange rate for small foreign currency purchases?
With the gradual decline of the AUD to around parity with the USD, and predictions of worse to come, I've been thinking it'd probably be a good move to convert some of my for-travel savings intended to use over the next few years. Probably be looking at moving $7-8000 into a mix of USD/GBP/Euros I've got a Commbank Travel Money card, which I've used when travelling in the past, but the rates aren't fantastic (about 4 cents below the market rate). Are there any realistic alternatives that offer better rates? I've seen that HSBC offer foreign currency accounts for relatively low minimum deposit amounts, which I understand would let me take advantage of the more favourable exchange rates offered by OzForex/XE/etc, but I'm wondering if that sort of thing would be really worth it, since I'd only be saving a a few hundred bucks all up, and it doesn't look like it can be used as a transaction account when travelling (no ATM/EFTPOS/BPay facilities), meaning I'd presumably have to withdraw cash and cart that around when it actually came time to travel? Does anyone have any favourite methods for this sort of thing?
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