UK Decides to leave EU: Will it be a wise move to buy Pound Sterling?

zehrila · Jun 24, 2016

Since last night, I am seeing massive fluctuations in the currency. Just few hours ago pound was going down, currently it is changing by the minute. Just few minutes ago $20,000 were equal to £14474.71 just checked after 3 to 5 minutes and now $20,000 are equal to 14506.95.

Wondering if it would be a wise move to convert all foreign currency into pounds or other way round?

spiderspider · Jun 24, 2016

Won't take the markets long to realise that the pound is cheap.

The traders tried to make quick money (their job really) by gambling on a remain vote. Now they are trying to cut their loses. This is why the pound went up in the last few days.

Edwin · Jun 26, 2016

FYI, the pound is dropping quite significantly again in early trade in Asia. But of course volumes are thin - the real test comes when the local market opens tomorrow morning. On XE.com as I write, $20,000 is £14,870.35. Of course, that's a fictional "mid-rate" and you'll get worse from currency dealers, but it provides a metric to keep track of.

Mark84 · Jun 26, 2016

Well the pound isn't the issue, it's totally the wrong way to look at it. You need to know and keep an eye on the Greek Bailout coming in July.

They will of course get it because the EU can't afford any nonsense, even at great great cost to its credibility. However to keep people onside throughout Europe, as German's and French citizens don't like the idea of the lazy Greek's getting bailed out (even though they don't get a penny, the German and French banks who loaned Greece the money actually get the bailout

). They need to make a song and dance about it before giving it to them at the 11th hour. This will make the euro bounce about and gold rise even more.

If you are getting out of the pound - do not put it in the Euro, as that is about to drop through the floor - it's higher than it should be right now because of last week. Dollars or gold are where you want to be right now.

Gold's gone up another 2% since trading re-opened an hour ago.

https://www.bullionvault.com/gold-price-chart.do

Edwin · Jun 26, 2016

BTW, depending on how much cash you have in different currencies, it may be worth considering a "dollar cost averaging" strategy (despite the name it doesn't apply only to dollars).

Usually it's aimed at investments over reasonably lengthy timeframes, but in a volatile market it may make sense even for a timeframe of a few days to a few weeks.

Basically, what you do is "chunk" your money up and "invest" (in your case, exchange) a fixed amount every period. That way, you won't do as well as the best day within the period, but you also won't get hurt as badly as if you picked the worst day.

An example (completely fictional numbers)

Day 1: £1 = $1.20; $20,000 = £16,666.67
Day 2: £1 = $1.25; $20,000 = £16,000
Day 3: £1 = $1.23; $20,000 = £16,260.16
Day 4: £1 = £1.19; $20,000 = £16.806.72
Day 5: £1 = £1.17; $20,000 = £17,094.02

If you happened to change all your money on the best day, you can see at a glance that you stand to make quite a lot more (£1,094.02 more) than if you happened to change it on the worst day.

But because you can't predict in advance which will be the "best" or the "worst" day, you decide you'll exchange 1/5 of your cash over each of the next 5 days. That earns you £16,565.51 - not as good as the best day, but £565.51 better than the worst day.

(As I said, this technique is more commonly applied to investments such as stocks or unit trusts, with funds being added monthly or quarterly)