# What's the best exchange rate: dollars to local currencies, or local currency to another local currency?

When traveling across several countries in South America or Asia, do Dollars/local currency or Euro/local currency have better exchange rate than local currency of country A / local currency of country B in the same region?

• Can you be more specific about "local currency/local currency?" I for sure know this aint the case in US and many Asian countries Jun 7, 2013 at 12:55
• I think this question makes perfect sense in the context of moving between countries in South America / Asia. The OP means "local currency of regional country A" to "local currency of regional country B". Jun 7, 2013 at 20:10
• Mostly the best way is to get money from the bank, (ATM or whatever method you chose) and exchange all left over money when you get across the border to the next country (and plan on having only a little left over.) If there is a lot of cross border traffic, you might even be able to use the money in shops at an exchange rate that matches exchanging small amounts.
– Willeke
Feb 2, 2018 at 16:29

Speaking from my experience, it is almost always better to keep a base amount of money in US dollars and convert it at each country to local currency. (Or, alternatively Euros or British Pound - but only if you already have them, i.e., no point going from Euros -> US dollars -> some other currency).

The reason for this is that US dollars are far more in demand - and thus exchange rates are more competitive - as compared to other currencies. In fact, with some Asian currencies you might find that isn't even possible to exchange one Asian country's currency to another without going through an intermediate currency like the US dollar.

While the exchange rate obviously fluctuates, I'll take a simple example to prove my point. Say you have \$100 and you want to convert to Thai baht.

And you convert the same dollar amount to Vietnamese dong.

Finally, take the equivalent Thai baht and convert to Vietnamese dong.

The difference in this example is minimal (~1300 dong, in favour of US dollar conversion) but this example is based on stock exchange rates, which is almost never the case in real-life. Like I said, there's far more demand / supply of currencies such as US dollars (Euros, and somewhat, Pounds) - and more competition between foreign exchange dealers - so you're almost always guaranteed to get a better price with those, rather than converting your entire currency to a local currency of country A, and then in other countries.

Besides this obvious advantage, another reason to not convert your money to a regional currency is that due to exchange rates, the US dollar (.../ Euro / Pound) is easier to carry in terms of number of actual currency notes for any monetary value.

• Upvoted based on experience. It's almost always best to carry US dollars (if you have them) and convert after arriving in your destination country. Feb 2, 2018 at 21:08

It depends and varies daily, so the exercise is somewhat theoretical. Now say, you faced the decision to change money at a particular time with a certain official money changer or the bank.

• Changing from A -> B incurs one fee plus a half-spread. (*1)
• Changing from A -> B -> C incurs two fees plus two half-spread (*1)

Looking simply like this makes look like getting the money changed in one hop gives you a better deal. Even places with no fee (but a rate), you still end up multiplying 2 rates.

In practice for most currencies it matters little. The reason is that there only a few direct currency pairs which the bank uses as basis to establish all rates. Changing from USD to EUR or to GBP, is direct. It means that the bank calculates how much it buys and sells those currencies. For other currencies, a bank actually compounds two rates in order to determine the exchange rate, so if you had to change NZD to NOK, then most likely the bank you compound the NZD to EUR and the EUR to NOK rate. So, even though the customer sees it as a single conversion rate, it is un fact equivalent to two.

Bottom line, doing a single conversion is most likely better, the difference is minimal for the majority of currencies. BTW, I wrote the software that decides what value banks offer each currency at to other banks.

(*1) The spread is he difference between the buying and selling price of the currency. Usually people get covered about half but not exactly since a bank may find it more desirable to buy than to sell, so they skew the spread in favor of one or the other currency.

The question doesn't really make that much sense, as exchange rates vary continuously, however if you are looking to decide whether to take dollars to each country then change them there for the local currency, or whether to change all your money for local currency in the first country and then change to the next local currency as you travel, then I think this is answerable:

My decision would be entirely round risk: do you want to be carrying large amounts of currency with you? I would typically not take much currency, perhaps some travellers cheques, but instead go to one of the major financial centres on arrival in a country and transfer money from my home account into local currency. Worth hunting around for the best exchange rate that day, but worth looking at how reputable the exchange seems.

Every time you exchange currency, you will lose a little on either commission or on the buy/sell spread. The currency exchange people need to make some amount of money.

If you exchange USD -> THB -> VND you will pay this amount twice instead of once. So this is not the best way.

Because of currency fluctuations, you could come out in front. But the fluctuations could also make your situation worse. On average you are going to lose. If you could predict the currency fluctuations accurately then you can become a currency trader and make plenty of money for travelling.