Worried over US travel costs? It's time to take that trip to Bali

"You really love this song," she said entering my room with a view. "Don't you?"

Peter Sarstedt was singing "Where do you go to my lovely, when you are alone in your bed."

"Yes I do," I replied. "There is a certain honesty to it, which has gone missing from music these days."

"Talking about honesty," she said, "I need your honest opinion on something right now."

"Tell me."

"You know V, I have been wanting to take my parents on a foreign holiday for a while."

"Yes you have told me about it."

"It has been my dream since the day I started working."

"What is the problem?"

"Well, you keep writing about it all the time. The rupee has lost value against the dollar."

"So?" I asked, still not getting what she was implying.

"Haven't you been reading the papers? They are all full of stories about how foreign holidays have become expensive."

"Oh that. It's not a problem at all."

"How is not a problem? The dollar has crossed 72 rupees."

"Let me explain this to you."

"Okay."

"What was your budget for the holiday?"

"I wanted it to be a slightly semi-luxurious kind of holiday. Ten days in Bali. My mother loves beaches. And my father has always wanted to see the temples of South-East Asia."

"Yes. I know that. But what was your budget?"

"I had booked flight tickets and the hotel well in advance. So that cost does not change."

"Hmmm."

"Over and above that, I thought for the car rentals, eating out, tickets to monuments, etc, I would spend around Rs 1 lakh to Rs 1.25 lakh more."

"Ooh. Serious money is being spent."

"Arre. I have been saving for this for a while," she explained. "I don't want to cut costs when it comes to my parents."

"Great."

"So tell me."

"Yes. Let's do some maths," I said opening Excel on my computer. "You will not be able to spend rupees in Bali. You will need Indonesian rupiah, which is the currency of Bali.

"Okay."

"Now converting Indian rupees into rupiah is typically not possible. First you convert rupees into American dollars and then dollars into rupiah."

"Okay."

"So, currently banks are selling one dollar for around Rs 74. At that rate you will get $1,689 for Rs 1.25 lakh."

"Yes."

"In Bali you can convert dollars into rupiah. One dollar will give you around 15,000 Indonesian rupiah. For $1,689 you will end up with around 25.3 million rupiah."

"Whoa!"

"It just sounds quite a lot."

"Let's say you had gone to Bali earlier this year in April. At that point of time, banks were selling one dollar for around Rs 66."

"Yes."

"At that rate you would have got $1,894 for Rs 1.25 lakh."

"Yes."

"Now one dollar at that point of time was worth around 14,000 Indonesian rupiah. When you converted your dollars into rupiah, you would have got 26.5 million rupiah."

"Oh, the difference is not much."

"Yes. What you would have got back then would be around 5% more than what you will get now."

"That's it?"

"Yes."

"But how is that happening with the dollar at 72."

"Well. The Indian rupee is not the only currency that has lost value against the dollar. Other currencies have lost value as well."

"Oh."

"Of course, the rupiah has not lost as much value against the dollar as the rupee has, which is why you would have got 5% more rupiah if you had chosen to go in April, and not now."

"That's some revelation."

"Of course, if you choose to go the United States or to a country where the currency hasn't lost value against the dollar, this logic does not hold."

"Yup I got that," she replied with a satisfied smile on her face.

The sun had just set. She was sitting next to me. Peter Sarstedt was still singing on loop.
It was a lovely evening.

(The example is hypothetical).

(Vivek Kaul is the author of the Easy Money trilogy).