Currency changes due to hung parliament?

[mumblechum]

Sorry this is v dull, but important to me. DS is going alone to the States in Summer and I'm planning on giving him the equivalent of £500 in dollars to cover his spending money.

Would it be sensible to convert this into dollars now on the basis that the pound may go down against the dollar if there's a hung parliament?

Prob is I don't actually have all the £500 right now so potential o/d charges for a couple of weeks would affect my decision.

any experts out there?

anyone?

Not an expert at all but.....

The worst case scenario that I've seen suggested is a fall to $1.38. The £ is currently trading at about $1.52, so this would represent a fall of about 9%. This would mean that in this situation it would cost you about an extra £45 to buy the same number of dollars as at present (assuming my maths isn't dodgy!)

However, it is by no means a guarantee that sterling will fall if there is a hung parliament - it's a very debatable issue with lots of 'experts' disagreeing, so it would be very much a gamble at this stage. If you had the money up front then it would possibly be worth converting now as I would have said it is unlikely that sterling will gain much after the election, but you need to weigh up the certainty of bank charges against the gamble of saving yourself some money.

Cheers Daisy.

Bear in mind that there is also the possibility that the pound will go up, so it would not be wise to incur borrowing costs to do this.

A common strategy used by professional treasury managers in this situation is to hedge half of the exposure (for a technical explaination of this google "minimax regret"). Do you have £250 to spare now?

I would change half now if you possibly can, as Daisy said the pound is unlikely to gain from it's current position against the dollar.

it's worth bearing in mind that the £ has dropped signifficantly anyway from the beginning of the year from approx $1.65 to as low as $1.47 and currently trading at $1.53.

There are lots of things - not just a hung parliament that affect the currency markets, currently they are being affected by the situation in europe.

It's also worth bearing in mind that although a hung parliament would likely affect the currencies in the short term i.e. on the day that the result is announced, if an agreement is reached on a coallition government between two parties the currencies are then likely to stabilize again.

I would wait tbh as this level is unlikely to be sustained in the long-term.

Thanks all. I have about £250 spare this month so will use that to buy dollars but won't go o/d.

Cheers

MC