I live in the UK, but I’m paid mostly in US dollars. As a result, watching the exchange rate is a big deal for me. If you’re changing money, picking the right time makes a lot of sense.
One of my favorite tools are the real-time quotes you get from the Forex Directory. Here’s the dollars-to-pound view. You can watch and see how the latest trades are going, which is super handy if you’re trying to decide if you want to change up on a particular day or perhaps hold off for better times.
Also look at the bottom of that page. There’s a chart of the exchange rate over time, which is again a great tool to better make your decision. Right now, the dollar’s doing sucky — about $1.86 to the pound. Change the Time Scale option to monthly, and you can really see how sucky. Back in 2001-2002, it was about $1.40 to the pound. Now those were happy days. Still, we’re below one of the most recent all time highs of $1.95 to the pound, as was the case in 2005.
I’m not a currency trading expert, but in general, what goes up does tend to go down. Right now the pound is going up, up, up. So I’m sitting tight on doing any exchanges, since I know in a few weeks, there’s a pretty good chance it will fall down. That’s not guaranteed, of course. It might keep climbing and climbing. Our national debt in the US certainly doesn’t help things. But as our interest rates have climbed while the UK has stayed level, the dollar-pound exchange rate has gotten better. And as long as Gordon Brown keeps spending more than he’s taxing me, there’s still hope for the dollar (assuming George Bush might decide to spend less than he’s also taxing me, compared to Gordon).
If you’re living in the UK, I highly recommend getting a Citibank UK account. Get a current account in pounds, then a US dollar current account as covered here. Pay into your US dollar account, then you can move money over through the online system whenever you want into your pound account. The rate is very competitive — you’ll only get a better rate if you call Citibank directly and are changing a large sum of money.
Ignore the advice on the Citibank site about how you’ll be able to move money instantly to a US-based Citibank account. It’s a joke. Citibank US and Citibank UK act like they don’t even know each other. I tried this a few years ago and encountered all types of hassles in moving money from the US to the UK. Instead, either do wire transfers into your UK-based dollar account or just write a check from whatever US bank you have and send it in for deposit. It takes about three weeks to clear, so don’t be anxious.
Want to track the exchange rate more? Investica has a newsletter you can take. Here’s the latest forecast on the dollar-pound situation. I can’t say if they are accurate, though. I always forget to go back and check. Well, let’s do it now!
- May 2: $1.837 is predicted
- June 2: $1.786 is predicted (so hang in there!)
- Aug 2: $1.8335 is predicted (so change in June!)
- Nov 2: $1.824 is predicted
- May 2, 2006: $1.793 is predicted (so wait a year!)
OK, I’ll check back on these dates and see how they are doing.
Personally, I’ve always operated on the baseline of $1.65 to the pound. Why? That’s about where it was when I first came to the UK, and it just “feels” like the right level. So if I change up below that amount, I feel I’m a winner. But given recent years, I’ve operated more on the $1.75 to the pound rate, since I haven’t seen the $1.65 in ages.
A couple of more exchange tools. OANDA lets you pick any two currencies, then you can get the current rate (and choose from a variety of different levels, such as interbank versus credit card rates). And yes, Google has a currency conversion feature, like this: 1 gbp in usd. I just never remember what acronyms to use and searching for 1 pound equals how many us dollars doesn’t cut it. The only place that does work is on Ask, as does 1 gbp in usd, which doesn’t work at Yahoo or MSN).
Yahoo does have currency conversion, despite the two queries above not working. You’ve just got to remember to use the word convert, such as convert 1 pound to dollars. MSN has lots of special shortcuts but currency conversion is not among them.
Finally, there’s the Pacific Exhange Rate Service’s historical data. Pick two currencies and you can chart them back to 1971. Here’s the pound-dollar chart from then until today. You’ll see how good 2001-2002 really was, with only the 1984-85 period being better.
{ 13 comments… read them below or add one }
Hi Danny,
I have been working in the US onboard an American cruise liner were I got paid in US Dollars, I have now returned to the UK and I am very dissapointed to find that the exchange rate is very bad to change my money back to Pounds.
When I was in the US 2 months ago the rate was $1.40 to the pound onboard the ship, however since I have been home I now have to give them $1.71 to the pound , as you can imagine I am not willing to exchange 6 months of US salary to pounds as I am down nearly 2 thousand pounds to what I aws expecting to get .
Do you have any advice you could give me ? should I hold off for a few months or am I wasting my time and should just take a loss and change my Dollars?, also would it make a difference if I travelled back to the US to change it ?
Please help.
Helen.
Well, it might help to think that a year ago, the rate was $2.00 to the pound. $1.40 was an exceptionally low rate — you have to go back to 2000 & 2001 for the last time it was like that. It’s not what I’d have considered “normal.” Rather, around $1.65 is what I’d long worked off of. So at $1.71, you’re still doing pretty well. I just looked, and I see a bank rate of about $1.60, so perhaps it’s dipped since you checked.
Rates change all the time, and they can go up or down for a variety of reasons — there’s just no telling you what to do, I’m afraid. If in doubt, you could hedge your bets. Change 1/3 or 1/2 now; change another 1/3 or half in a month; do any remaining down the line, then it might average out well. I’d be surprised if you see it get back down to $1.40 soon, but it could happen.
Going back to the US shouldn’t make a difference. What will make a difference is not going to the standard places on the high street that change cash. You want to find a bank, and you might check with several of them to see who will give you the best rate with the least amount of fees. That was a plus to having a Citibank account — the rate is good, and there was no fee charged for changing your money over.
Hi, thanks for this information. I do still have a few more questions. Is it easy for an American to get a Citibank UK account and what is necessary to do so? If I don’t have an account as yet, where will I get the best rates just walking off the airplane? Will it be better to wait and get to an M&S to change my money or will the Thomas Cooke’s be better? that sort of thing. Thanks for the help and assistance. Great article and very informative. Kelly
It’s easy if you’re living there. Sounds like you’re just gong to visit. In that case, hard for me to say, as I rarely had to change money as a tourist. In general, airports don’t pay as much — and you have to consider not just the rate but also the commission. You might find just using your ATM card to pull money from a cash machine out of a US account works as well. Rates have tended to be good and fees not that bad.
What was the conversion rate from US DOllar to Pounds in May 2008?
Using one of the tools about, about $1.97 to the pound.
im going to america next year (june 2010), have you any idea if the pound will get stronger over the next year????
No, I don’t have any special insight as to where it may head, sorry.
Hi Danny,
This is great info. How do you handle tax etc? If living in the UK and getting paid by US companies? Are you basically just registered as being self employed in the UK and just report that as contract income?
I am an expat who is looking to move back to the UK, but I will maintain my US contracts and still get paid in dollars. Currently, obviously I just pay US tax but I’m wondering how that will work when I move back to the UK
Thanks!
Mark, if you are a US citizen, you pay tax on everything you earn worldwide. And depending on the country you’re in, you may also have to file taxes in that country. As I was resident in the UK, I paid both US and UK tax. The two countries have a treaty so that you get credit and don’t effectively double-pay, even if you have to double file.
If you move to the UK and that’s your main place of business, you’ll probably have to pay UK tax even if the income is sourced out of the US.
Thanks for the info Danny that makes sense. I am a UK citizen and will no longer have a residence in the US when I move back. I am hoping to just file taxes in the UK to keep things easier. Guess I’ll make a few phone calls to find out.
I’m not trying to avoid paying tax I’m just wondering with being paid by a US company whether I should file as self employed or as an employee in the UK. Thanks for the info!
I find that the Schwab Bank with there no cost High Yield checking does the best job in converting dollars to pounds. You have your US dollars deposited into your Schwab account, then withdraw at ATM or wire to any where into any bank in the world. When you withdraw at any VISA marked ATM in the world, you do not pay any ATM fees (if local ATM fees are charged at transaction, they get credited out of your statement later and are paid by Schwab), and no rediculous currency conversion rates. The Schwab ATM card is also a debit card. It’s a good deal. We have used it through the world including the UK without any difficultiy. I highly reccomend it for personal and business use.
hey,
Reading down the page i was wondering what everyone else is doing with there dollars? I also work on an american cruise line and live in the UK, what do most people think the best time to convert the dollars are, i can afford to wait for over a year. Also in what ways are you transfering your money over to get the most out of it.
Thanks
Emma