Sell any dollars you hold

It is difficult to predict currency movements. Hence, it’s best to encash.

Nikhil Murli has just returned from a month-long holiday at San Francisco. He had taken $3,500 in cash on a prepaid forex card and a traveller's cheque. He could not spend the entire amount. At the end of the month, Murli was left with around $500 in cash and another $100 on the card.

The rupee has been depreciating since August and had dipped further by the time Murli returned. He learnt it may further depreciate. He was advised to wait to take advantage of it. "I want to sell the dollars and use the money to buy a television, which otherwise I would have had to buy on equated monthly instalments (EMI)," he says.

The rupee touched Rs 50.90 against the dollar on Wednesday. In the last two-and-a-half months, it has fallen almost 11 per cent. Some market players expect it to go further down. This has left Murli confused on what to do with the extra foreign currency.

Murli had purchased dollars in early September from a travel agent at Rs 45.89 per dollar. The rupee then stood at 45.70. When you buy dollars, you do so at higher than the exchange rate.

Shyamal Saxena, GM, retail banking, Standard Chartered Bank, suggests Murli should sell now. "An individual is not left with a huge amount of foreign currency. He/she will have a few hundred dollars. One should not hold and lock this liquidity. The rupee rate would make a difference if the amount in question is huge," Saxena explains.

Individuals do not understand the money market movement well. Hence, it does not make sense to wait and bet on rupee movements. As the rupee has touched a new low, this is a good rate to exchange the dollars, advises Ravi Menon, head, foreign exchange, Cox and Kings. "The dollar is not likely to go up much from here. In fact, the rupee could appreciate. So, exchange the dollars before the opportunity is lost."

The currency on the prepaid card can be held, as the forex cards are, typically, valid for three years. If Murli had any currency left on the traveller's cheque, he would have been required to encash it in 60 days on return. One can go to the issuing bank or a travel agent to encash both. The exchange rate on the date of transaction will be considered.

Certified financial planner Arnav Pandya says: Convert the currency even if you are planning another trip soon. "There are chances the rupee may depreciate further. The dollar will be more expensive than on the last trip. So, exchange the dollars and invest the money in, say, a fixed-income product," he suggests.

Murli is advised to sell the $500 in cash and hold on to the money in his prepaid forex card. When you sell dollars, you get a rate lower than the exchange rate. For instance, the rupee is at 50.74 per dollar today, but Akbar Travels will buy it at Rs 50.10, plus Rs 26 extra; Thomas Cook at Rs 47.40, plus Rs 150 extra; and State Bank of India at around Rs 50.