Home » Currency 101 » The year of the dollar?

With vaccination programmes starting and international travel set to resume by the summer, it’s a good time to kickstart your plans to buy a property abroad.

At Smart Currency Exchange we have specialised in helping people buy homes abroad since 2004. We can help you to make the purchase safely and at the best exchange rate. Register with us and we will be with you from first plans right through to getting your key in the door!

Perhaps surprisingly, house prices in Australia, New Zealand, Canada and the US are generally booming. Bargains are still available, however, as the pandemic and the rise of homeworking change lifestyles. There has been a migration out of city centres as homeowners seek more space.

If you’re hoping to buy abroad next year, finding a good exchange rate and locking it in can save you thousands. So how has the currency of your future home – whether greenback, buck, kiwi or loonie – fared in 2020 and how does it look for 2021?

If you are planning to buy an overseas property in the new year or need to make regular payments in foreign currency, lock in a forward contract now.

US dollar (USD)

The US dollar is hard to pin down, with many variables at play. Like the country itself though, the greenback has had a rollercoaster of a year, eventually sliding to around its lowest level against GBP since spring 2018.

When the global pandemic started the US dollar strengthened due to its ‘safe-haven’ status: a reliable currency to keep your money in during a crisis. However, as vaccines bring an end to the global pandemic, so riskier currencies are being favoured over the US dollar.

Joe Biden’s election win also weakened the dollar and that may continue if he introduces higher taxes, healthcare costs, more energy regulation, less protectionism and less influence over the Federal Reserve. A return to more ‘conventional’ governance (less Twitter) and reduced geopolitical tension could also cut the USD’s risk appeal too.

GBP/US movements during 2020

New Zealand dollar (NZD)

New Zealand’s uncompromising handling of the virus led to short-term economic woe but, overall, better economic performance than most of its global counterparts. With only 5 million people to vaccinate compared to the USA’s 350 million, getting the country immunised and the borders open should happen early in 2021.

The Kiwi dollar has generally outperformed other currencies in 2020, including sterling. For sterling buyers, exchange rate fluctuations mean that an average N$600,000 home in New Zealand has ranged in price from as low as £287,000 in April to a current level of £317,500. If New Zealand’s economy makes a faster recovery than the UK’s in 2021 they may well cost even more.

GBP/NZD movements during 2020

Australian dollar (AUS)

Australia’s close economic ties as commodity exporter to China meant that its dollar suffered more than most currencies in the early pandemic. As China became the first country to experience a downturn, so the Aussie dollar dropped to multi-year lows.

First down, first up? The Australian dollar should benefit from a V-shaped global economic recovery in early 2021, but the picture is actually mixed: it continues to struggle against GBP while hitting a 30-month high against the US dollar.

GBP/AUS movements during 2020

Canadian dollar (CAD)

Canada continues to struggle with COVID-19 infection rates. Although far less badly affected than the USA, Canada’s economic performance in 2021 will depend on how quickly both nations overcome the pandemic and trade with the US, where 75% of its exports go, can return to normal.

With the world’s third largest oil reserves, a return of international aviation would also support the economy and the currency. Downside risks for the Canadian dollar (nicknamed the loonie) include the Biden administration weaning the US off fossil fuels.

GBP/CAD movements during 2020

 

Your next steps – are you ready for 2021?

Ensure that the events of 2021 don’t affect the value of your budget. If you leave your money unprotected, your 2021 property purchase or regular payments overseas could more costly than you expected.

Why not talk to our trading team about putting a forward contract in place? They will consider your requirements and suggest the best solution for you.

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