Currency exchange, a facility or a service?
The topic of exchange rates and currency conversions has been particularly prominent thus far in 2022, with a hugely volatile foreign exchange market seeing large fluctuations in staple currency pairs such as GBP/USD and EUR/USD. Those of us who typically only deal in the most established currencies or only convert currency for a yearly holiday may have previously been blissfully ignorant of the foreign exchange markets, but with the Pound Sterling down over 20% this year against the US Dollar, it has become much harder to ignore.
Even before this year’s events, exchange rates have been more volatile recently – Coronavirus and Brexit are just two reasons things have been a little unsettled. But the good news is there are some simple ways to protect your money transfers from these currency ups and downs.
GC Partners is a specialist financial services provider with extensive experience in the foreign exchange market facilitating global money transfers across more than 125 markets. Using our experience and knowledge of the foreign exchange markets, we have put together four easy ways that you can minimise the impact of currency fluctuations on your spending power.
1. Stay informed
Speaking to an experienced currency specialist about when to transfer money is vital, as not everybody has the time to keep up with the news impacting the value of different currency pairings. Having someone with in-depth market knowledge, who can keep you up to date on market movements, will give you the peace of mind to make better, more informed decisions.
2. Understand your options
Talk to your currency specialist about what you need – when you make money transfers, who you make them too, how much they are for etc. Then they’ll be able to present the options that are going to work best for you, and you’ll benefit from a completely tailored service. With proper planning in place, the worst-case scenarios can be avoided.
3. Wait for the right exchange rate
Make use of an automated service that monitors the market 24/7 and will exchange the currency if it hits a specified level. You can agree on a preferred rate with your currency specialist and only buy your currency when that target rate is reached. This allows you to take advantage of overnight spikes in rates and means you’re not restricted by normal office hours. This also reduces the time burden required to constantly check the exchange rate to see if it has hit the rate you were looking for.
4. Secure your exchange rate in advance
If you’re planning and want to know exactly how much money transfers will cost you over the next two years, you can use a forward contract to buy your currency at a fixed rate and pay later.
By fixing your exchange rate in advance, you can minimise the risk of any currency movements. Buy your currency at a fixed rate, pay a small deposit, and the currency is held for you until you pay the balance in the future. Perfect if you’re paying a deposit on a property and have a balance to pay at a later date.
If you have been regularly transferring money to and from a specific country, it is worth checking what your transfer options are to ensure you are receiving the best exchange rate possible – especially if you have been relying on your bank.
Banks often cannot offer the flexibility and level of service that a currency specialist can offer, especially with the fluctuations we are currently seeing in the foreign exchange markets with global pressures such as Coronavirus, Brexit and the situation in Ukraine contributing to a tumultuous environment. Additionally, the exchange rate from the banks can often be significantly worse than alternative options, meaning the consumer is losing value for the convenience of exchanging with their bank.
Here are four money transfer options that a currency specialist such as GC Partners can offer, some of which are not typically offered by banks. These could help you avoid currency risk and ensure you receive the best exchange rates every time you make a transfer with a service tailored to meet your needs.
1. Spot transaction
Buy now, pay now. An easy way to transfer money fast at today’s rate. Buy your money at the current exchange rate and send your payment to your currency specialist’s designated account. Once received, your foreign currency will be transferred to the bank account of your choice. This is ideal if you need to send money right away.
2. Forward contract
Buy now, pay later. Pay a small deposit to buy your currency at a fixed rate today, and your currency will be held for you until you pay the balance later, minimising the effects of exchange rate fluctuations. For example, if in a year you need to convert Pound Sterling to US Dollars but are concerned that the pound’s value will be lower in a year, a forward contract would allow you to lock in today’s exchange rate to be executed in a year.
This option is perfect if you are paying a deposit on a property and have a balance to pay at a later date. It also works for smaller, more regular amounts too. You can budget and plan more easily, knowing exactly how much will be transferred each month.
3. Limit order
If you are budgeting for a specific exchange rate, you can set a limit order that automatically purchases the currency once your preferred rate is met. This is helpful if you want to take advantage of overnight spikes in exchange rates and not be restricted by normal office hours.
4. One-Cancels-the-Other-Order (OCO) Order
An even smarter version of a limit order, an OCO order lets you set a preferred exchange rate and a lower-level rate, letting you take advantage of any spikes in exchange rates with the security of a lower level if the market suddenly drops.
These are some ways that utilising a currency specialist such as GC Partners can provide value when dealing with foreign exchange. We transacted over $7.5bn and made over 300,000 payments on behalf of our clients last year and work with a wide range of individuals, businesses and partners. GC Partners is here to help regardless of how large or small your payments are.
Grant Henderson, GC Partners
Grant is Head of the Middle East at GC Partners, a specialist financial services provider. Since 2003, GC Partners have helped over 100,000 clients transfer their money to more than 125 markets worldwide.