There are two primary reasons why you would care about current exchange rates. Either you’re planning to leave the country and need to budget the amount of money you have against the other countries economy, or you’ve done some investing and exchange rates dictate the profit you can make. I’ve never had the pleasure of doing either but from a mathematics perspective, exchange rates fascinate me.
Exchange rates are determined on basic supply and demand principles. For example, if interest rates increase in the United States, the demand to save money in the best US banks will increase, adding value to the dollar. On the contrary, if inflation occurs at a higher rate in the US than in other countries, the demand for US goods decreases thus decreasing the value of the dollar.
Everyday, the value of a countries currency fluctuates and as of February 2012, we’re looking at the following currency conversions:
Euro 1.31750 0.75901
British Pound 1.58506 0.63089
Canadian Dollar 1.00106 0.99894
Australian Dollar 1.07009 0.93450
Mexican Peso 0.07720 12.95390
Swiss Franc 1.09354 0.91446
Russian Ruble 0.03311 30.20270
Indian Rupee 0.02034 49.16510
Japanese Yen 0.01314 76.12140
Israeli New Shekel 0.26796 3.73184
A common misconception is that purchasing power is equal among nations, so If I moved to Russia, I immediately increase my wealth 30 fold. The McDonald’s dollar menu in the US could be the 30 ruble menu in Russia so anyone planning a move to a country simply because the dollar is “worth” more than the local currency will be in for a big surprise.
With all of the price increases in the United States, you’re probably thinking that the US is the most expensive country to live in but that’s not close to accurate. Most economists would rank the US as the 10th – 15th most expensive country to live in and if your looking to blow your wealth as fast as you can, you may want to consider moving to one of these five most expensive countries.
- South Korea
If you break it down even further, the United States only has one city ranked in the top 10 as most expensive and it’s not New York or Los Angeles as you might think. Chicago continues to be the toughest city on your wallet but again, if you compare it to Tokyo or Moscow, it’s no contest.
Planning international trips can become very difficult if you plan to pay for everything with cash because some countries just won’t accept US currency. This means that you’ll have to find a currency conversion center, which can charge a fee. The smartest thing to do would be to find a credit card that is accepted worldwide but even that solution can cost you hefty international transaction fees. Make sure you have a plan in place before leaving because ending up in a country with no way to pay for goods in services can be an absolute nightmare.