2014 Travel Insurance benefit update

Travel Insurance by Grant Cochrane at freedigitalphotos.net

Source: Travel Insurance by Grant Cochrane at freedigitalphotos.net

Some changes to the Travel Insurance benefits have been released for 2014 and are listed below.

2014 Travel Insurance benefit update

  1. The  Medical Expenses limit on Leisure Cover and Business Cover has increased to R100,000,000.
  2. The Pre-existing Medical Conditions limit of Leisure Cover has increased to R500,000.
  3. Two new benefits under Section 4 (Cancellation) have been added:
    1. Postponement of your journey
    2. Cancellation due to the denial of your visa (excluding Africa and Asia Cover and Visitor to SA)
  4. Inconvenience Cover: single item limits under baggage cover have beenincreased and excesses have reduced to a straight forward R500.
  5. Security Travel Delay has been added as a new benefit, specifically to Leisure Cover and Business Cover – this covers a traveler if their flight is delayed due to a security or terrorist threat.
  6. Kidnap and Wrongful Detention has been added as a new benefit, specifically to Leisure Cover and Business Cover.
  7. Rental Car Excess has been added as a new benefit, specifically to Leisure Cover and Business Cover – this covers a traveler who has hired a car and experienced an accident in the hired car and is liable to pay an excess on the damage to the car.
  8. The Excess Waiver benefit is now available across all leisure products (including Senior Cover, Visitor to SA Cover and Youth Cover).
  9. Youth Cover no longer can only be provided on an annual basis and can be taken up at rates for shorter periods. Youth Cover does not provide Adventure Sports Cover, but is available at an additional premium.

Amex cards and Diners cards

Due the amount of fraud on these cards, only Visa and Master cards will now be accepted because of their higher level of security.

Get a Travel Insurance quote online here.

Common Monetary Area

Common Monetary Area

Source: www.un.org

The Common Monetary Area group of countries accept South African Rands and there is no limit to the amount of South African Rands you can take with you when travelling within the CMA countries.
You may not purchase currency when travelling to the countries in the common monetary area. The currencies of the countries are all linked to the South African Rand and can be exchanged to Rand, but are not legal tenders in South Africa.
The members of the Common Monetary Area are;

 All four members have their own central banks and they are responsible for their own monetary policy with the South African Reserve Bank (SARB) formulating the policy for the CMA.

To read more about the common monetary area with regards to the objectives, history, issues, etc, there is a pdf document that goes into detail which you can find on the FinForum website.

Currency news 31 May 2013

Image from SABC.co.za

The South African Rand has weakened by over 15% against the US Dollar this year and has reached the lowest point since 2009. 

The Wall Street Journal reported that President Jacob Zuma said on Thursday that the country needs a minimum of 3.5% annual growth to put the economy "on the right foot". After President Zuma spoke, the rand trader above 10 to the US Dollar. Other currencies that suffered.

Other emerging market currencies such as the Turkish lira and the Hungarian forint also sold off Thursday on expectations that the U.S. Federal Reserve will start to slow its pace of asset purchases, threatening the recent rally in emerging market assets.

But the rand suffered the biggest losses.

A strengthening U.S. dollar aided the rand's fall on Thursday, but investors have also expressed their pessimism over South Africa's prospects by pulling out of the local bond market. Foreigners have sold more than $1.1 billion in rand-denominated bonds in the past two weeks, according to Rand Merchant Bank

"We seem to have entered a period of perennial malaise," said Goolam Ballim, chief economist at South Africa's Standard Bank.

Source: http://online.wsj.com/article/SB10001424127887324412604578514982206745370.html - author: Jessica Mead

FNB chief economist, Sizwe Nxedlana, said that the economy is likely to post growth closer to 2% this year which is below the 2.4% growth forecast of the central bank. 

The business insider reports that the unrest in the mining sector is dragging the economy down more than expected as per the GDP figures. South Africa relies heavily on export of gold and other metals.

The South African Reserve Bank is in a tough spot. It doesn't have a lot of currency reserves, so they don't have the same liberty to engage in currency interventions to defend the rand's value as some other central banks – Turkey, Brazil, and Russia, for example – currently enjoy.

"South Africa is one of the countries where you can be reasonably sure that there will be nobody stopping you," says Pawlowski. "So, this sort of thing adds up, and then it just becomes path dependent: stop-losses after stop-losses, and new levels, and so it goes."

Source: http://www.businessinsider.com/nasty-sell-off-in-south-african-rand-2013-5#ixzz2UqvE7SWD - author: Matthew Boesler


Rand at best level in seven weeks

Johannesburg - The rand was firmer at noon‚ at its best level to the US dollar in about seven weeks‚ on a combination of firmer commodity prices and worse than expected producer price index (PPI) for March.

“The firmer precious metal prices are providing a solid underpin while the PPI data reduces interest rate cut hopes‚” said Mike Keenan‚ analyst at Absa Capital.
At 12:15‚ the rand was bid at R9.0773/$ from R9.1239 at Wednesday’s close and R9.2035 at Tuesday’s close.
The local currency was bid at R11.8616/ from its previous close of R11.8694 and at R14.0063 against sterling from R13.9238 before.
The euro was bid at $1.3063 from $1.3014 at Wednesday’s close and $1.3001 at Tuesday’s close.

The annual percentage change in the PPI for final manufactured goods for March was 5.7% year on year (y/y) compared with 5.4% y/y and 5.8% y/y in February and January respectively‚ Statistics SA figures showed on Thursday.

Source: Fin24.com


Understanding Currency Rates

Exchange Rates - Image courtesy of watcharakun at FreeDigitalPhotos.net

Source: watcharakun at FreeDigitalPhotos.net

Understanding Currency Rates

The value of the currency exchange rates are dependent on supply and demand. Currency has a measurable value and is the cost of one foreign currency compared to another. The value of currencies are affected by economic forces like the national economic policy of a country, tax cuts, interest rate changes, import tariffs, people exchanging and trading currency, inflation and confidence in the government.

History of Currency

Centuries ago, gold was the currency used until the early 1930's when the US valued the dollar at $35 per ounce of gold. After World War 2, countries valued their currencies against the dollar which was based against the value of gold. In 1971, the US got rid of the gold standard altogether as the value of the dollar was halved to $70 per ounce of gold. This now enabled market forces to determine the value of the dollar and not gold anymore.

Currency Rates South Africa

When we travel overseas, invest overseas or import from overseas, we need to exchange our currency (the Rand) to the foreign currency. The exchange rates fluctuate daily and in order to change your currency, you need to do a conversion of currency rates. We have all seen the market news or heard it on the radio where the exchange rates are given. The rates given are Market rates and serve as an indication as to how our currency compares to other currencies.

The media rates given are not the rates you will receive when you exchange your currency. Banks and forex bureau's have to add a spread to that rate in order to make a profit. Some providers have large spreads and you will actually get much less than what you should. On top of the spread, commission will also be charged which is standard across the board. The percentage commission charged plays a big part as well as to the value you will receive upon exchange.

The market rate for the US Dollar is 9.0000.
Company A adds a spread of 2% to the rate. They will sell dollars to you at a rate of 9.18 and buy dollars from you at a rate of 8.82.
Company B adds a spread of 3% to the rate. They will sell dollars to you at a rate of 9.27 and buy dollars from you at a rate of 8.73.
So for $1,000, you will pay R9,180 (before commission) and receive R8,820 (before commission) from company A
or for $1,000, you will pay R9,270 (before commission) and receive R8,730 (before commission) from company B.

With the example, you can see what difference a 1% spread can cost you as a customer. Remember that commission will be added onto that figure and the companies also add their own commission charges to the deals.

So, before you engage in a foreign currency transaction, shop around and see how different the exchange rates and commission charges are all around. The consultants won't know the percentage added for the spreads (only the dealers will), but the consultants can tell you what the commission charge percentage is. If the commission charge is more than 2.7%, turn around and run away as you can get a better deal than that.

At fx Online, we charge 2% on commission for travel currency.

Where to get the rate updates and converter

We built a spreadsheet which is linked from dropbox to our website. The sheet gets updated everyday and you can access it at any time by visiting the fx-online.co.za website and clicking on the Rates of Exchange tab. This book has 2 tabs. The exchange rate tab for the exchange rates and a converter which will calculate your transaction for you as per the product of choice. Please note that this is an indication and once you place your order, you will get a quote with a confirmed rate which is in most cases a better rate than the listed rate on the spreadsheet.

In South Africa, we only have 3 currencies which you multiply to get a value. These are the USD (US Dollar), GBP (Brittish Pound), EUR (Euro). So if you see the exchange rate as 9.0000 for USD, you will be paying R9 for every dollar you buy. The same goes for GBP and EUR.

When you work with all other currencies, you will have to divide to get the value. For example, the AUD (Australian Dollar) is quoted as 0.1025. This is the inverted rate and to see how much you will be paying per AUD, you will take 1 divided by 0.1025 which will return a value of 9.7531.  The currencies are traded in the inverted state for accuracy and we get the feeds from the trading houses like that, therefor we quote inverted as well.

I hope you have a better understanding of currency rates and please do contact us if you need clarification on currency exchange rates as well as all of your foreign exchange needs.