Most analysts expect the value of the Australian dollar to fall against the United States dollar and the British pound and reduce the Australian dollar’s purchasing power in those countries.

The relative interest rates among the major economies are among the most important factors that determine currency exchange rates. Generally, a higher relative interest rate supports a higher currency; though currency exchange rates are notoriously volatile and hard to predict.

One Australian dollar buys about 93 US cents now. In April last year it was buying more than 105 US cents and hit a low of 87 US cents in late January this year. However, just about every analyst expects the Australian dollar to move lower against the greenback and pound.

Shane Oliver, the chief economist at AMP Capital Investors, expects the Australian dollar to fall to US 80 cents by the end of next year.

It may be lower by the end of this year, but there is still a window where the Australian dollar could go a bit higher before it goes down, he says. Alan Oster, NAB group chief economist, agrees. Central banks set interest rates.

He says the US central bank, the US Federal Reserve, will have to start raising interest rates and that should push the US higher against most currencies, including the Australian dollar.

Paul Bloxham, chief economist at HSBC, says the Australian dollar could fall to mid-80 US cents before the end of this year or sometime next year, depending on when the US Federal Reserve starts to increase interest rates.

Oliver says it is a close call whether the US central bank, the US Federal Reserve, or the Bank of England will be the first to start raising rates.

He expects the Australian dollar to weaken against the pound as the British economy continues to improve and British interest rates rise.

However, the Australian dollar is likely to hold steady against the Euro and the Japanese Yen as the European Central Bank and the Bank of Japan are “nowhere near raising rates” because of the weakness of Eurozone economies and Japan, Oliver says.

Jim Vrondas, chief currency and payments strategist with OzForex, a currency exchange service, which also offers a pre-paid travel card, says those travelling overseas may want to consider locking the good exchange rates now. Travel cards, of which there are several, including those of the big banks, can be loaded with up to 10 currencies.

Those planning a trip next year may want to think about saving with a travel card, rather than taking the risk of loading the card just prior to travel when the Australian dollar could be weaker. Some travel cards, but not OzForex’s, charge a fee each time the card is re-loaded and so loading small amounts may be expensive.

Travel cards can also be a good savings strategy rather than returning from overseas with a hefty credit card bill, Vrondas says. It is usually cheaper to pay for overseas hotels in overseas currency, he says. “Hotels can put a margin on the Australian dollar exchange rate when converting to their own currency,” Vrondas says.

Travel cards can could also be loaded with foreign currency and used to make overseas purchases online. Pre-loaded travel cards wary widely in their costs.

Late last year, online financial comparator Mozo released a report showing a difference in costs of hundreds of dollars between the best and worst card for a typical overseas trip.

The biggest difference in cost is the exchange rate that is applied by the card providers. As well as a reload fee there can also be a currency conversion fee when one of the pre-loaded currencies is converted into another currency.