Heading overseas? Don’t get short-changed by exchange rates

As the number of Australians heading to Europe and other warmer climes rapidly approaches pre-pandemic levels, travellers who don’t keep across currency exchange rates risk being short-changed.

Experts say the Australian dollar could be buying more of the British pound and the Kiwi dollar by the end of the year, while they expect little change against the US dollar and euro.

Westpac is forecasting the pound could reach 54 pence by the end of the year, from about 52 pence now. And the Australian dollar could be buying $NZ1.11 from about $NZ1.08 now.

Sean Callow, senior currency strategist at Westpac, expects the Australian dollar to be trading roughly where it is now against the US dollar, at about US69¢, and against the euro, at about 62 euro cents, for the rest of this year.

Mahjabeen Zaman, the head of foreign exchange research at ANZ, has the same forecast as Westpac for the pound and Kiwi dollar. She says the Australian dollar could be buying 61 euro cents by the end of this year.

Zaman says our dollar could be buying US70¢ by the end of the year, and could even reach US73¢ by the end of 2024.

Shane Oliver, chief economist at AMP, says there could be continuing weakness in the US dollar as markets believe the US Federal Reserve is close to the top, if not at the top, of its rate-rising cycle.

Relative interest rates are important drivers of exchange rates as higher interest rates in one country, compared to others, can attract more global investors, which can help to strengthen the country’s currency.

Oliver says the downtrend in the US dollar could push the Australian dollar above $US70¢ by the end of this year.