Currency Crunch — How to Make Use of Weakening Currencies to Further Your Travel Plans

From Japanese yen to Thai baht and Malaysian ringgit, popular Asian currencies have fallen significantly against the US dollar. Here’s why this is happening, and how it can benefit travellers like you.

Currencies all across the world are falling in value against the US dollar, especially so in Asia. While this may sound ominous, it’s not all doom and gloom. A weaker currency can be advantageous in some situations.

For one, export-reliant countries benefit, as customers in the US find their goods and services. For another, weaker currency also encourages inflows of foreign tourists, who are attracted by the prospect of an affordable holiday.

We’ll delve into how you can make use of weaker Asian currencies to further your travel plans later, but first, let’s discuss why Asian currencies are depreciating against the US Dollar.

What’s Behind the Asian Currency Slide

Federal Interest Rates

Asian currencies are dropping due to the interest rate hikes deployed by the US Federal Reserve, which are meant to rein in runaway inflation in the US.

You may be wondering why the Fed’s rate hikes would impact the currencies of other countries. Well, that’s because the dollar is the world’s reserve currency and accounts for a significant majority of all trades settled in the US, Asia-Pacific and the rest of the world (with the exception of euro-dominated Europe).

Consider the dollar and the Japanese yen. When the dollar rises, more yen is required to establish parity between the two currencies. Correspondingly, the yen is said to depreciate against the dollar.

Okay, but why would interest rate hikes cause the dollar to appreciate? Well, this is because higher Fed interest rates also cause the interest rates of bonds and other fixed-income securities to go up.

This rise in yields attracts more investors, who pull their money out of other markets and assets to buy up US bonds, pushing up the dollar’s value.

How Asian Currencies Are Faring

Asian currency (year-to-date)vs US Dollarvs Singapore Dollar
Ringgit (MYR)-11.85%-4.53%
Baht (THB)-10.56%-8.11%
Dong (VND)-8.05%-3.28%
Rupiah (IDR)-8.51%-3.07%
Renminbi (CNY)-12.36%-7.86%
Yen (JPY)-22.7%-18.69%
Singapore Dollar (SGD)-4.88%-

Source: Google Finance (retrieved 24 Oct 2022)

As you can see, Asian currencies have experienced moderate to significant declines against the US dollar, especially the Japanese yen and Chinese yuan. In comparison, the Singapore dollar seems to be holding up pretty well.

Interestingly, these six currencies have also fallen against the Singapore dollar, which is good news for Singaporeans planning a year-end holiday. With a stronger Singapore dollar, you’ll get more bang for your buck.

How Travellers Can Capitalise On Weakened Asian Currencies

Lock In Your Holiday Cash

Money Changer

With Asian currencies at a low, exchange rates will be to your advantage, making it a good time to pay your favourite money changer a visit.

Locking in your holiday cash now will allow you to purchase more of the foreign currency you need, giving you more cash to spend on your holiday — or correspondingly pare down your holiday budget.

Instead of exchanging your entire budget all at once, splitting your visit over several trips can help you capture the best rates possible. This is akin to the practice of visiting several money changers in order to score the best deal.

However, unless your budget is particularly large, the slight difference you may potentially stand to gain might not be worth the time and hassle involved.

Stock Up for Future Trips

Foreign currency

And while you’re at it, might as well take advantage of the low rates now to purchase more foreign currencies.

Exchange a higher Singapore dollar amount to generate a larger amount of foreign currency for a country you regularly visit, and keep the extra for your next trip.

Stocking up on foreign currency is also a good way to save towards your next holiday. Plus, if you note down the exchange rate at which you bought them, unused foreign currency can also be sold when rates turn in their favour.

Pay In Foreign Currency

Hotel Room

You may already be aware that when paying for overseas transactions, you should always pay in the local currency (i.e. the currency of the country you are visiting). This will help you avoid hidden mark-ups that artificially inflate the cost of your purchase and erode your forex advantage.

With Asian currencies being so low right now, this rule should be followed even more closely.

Besides just choosing to pay in, say, Japanese yen when shopping with your credit card in Tokyo, you should also look for opportunities to pay as much of your trip in the local currency.

One way is to book your hotel accommodations directly at the official website, instead of going through booking platforms. Your transaction will be charged to your card or bank account in the local currency.

Alternatively, if your booking platform allows it, choose to pay for your booking directly at the hotel when you arrive — this has the same effect, but be sure to specify you want to pay in their local currency, and not Singapore dollar.

Use the Right Credit Cards

Foreign currency

You may also want to consider using a credit card instead of cash while travelling to maximise your spending while on holiday.

Credit cards often offer lower transaction fees than the exchange fees given by money changers. This can help prevent your savings from the preferable exchange rates being eaten up by the costs to exchange the currency.

Miles credit cards may also provide additional rewards on overseas and travel related spending. Check out our article on the best travel cards to find a credit card that best suits your travel needs.

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