Do you need to exchange currency? How do I get the best exchange rate?

As we enter into what is historically quiet time of the year, the holiday season, I will explore below how you can guarantee you are getting the best exchange rate when looking to send money overseas.

Why do exchange rates matter?

People from all walks of life are reliant on currency, from Private individual’s buying a property overseas, to companies paying invoices in a foreign currency. Market fluctuations can therefore have a huge impact on the cost. When deciding the best time to exchange currency, it’s important to understand what can affect the rate.

What data and information can impact exchange rates?

Every day, we see a constant flow of economic data. This has a significant impact on exchange rates, both positively and negatively. This can also affect how central banks view monetary policy and interest rates. Interest rate volatility is one of the main catalysts for an exchange rate movement. (Generally if an interest rate rises, or there is speculation for an imminent rate rise, then there is an increase of demand for that currency and the value increases. The same is seen if the situation is reversed.)

It’s not just economics however, as many other factors can impact exchange rates. For example, a country’s political status has a significant impact on the value of their respective currency. During times of political instability, e.g. during an election or referendum, you will often see significant volatility for the currency of the country involved. A case in point is the recent value of Sterling that has largely been driven by the result of the EU referendum.

How do you get the best exchange rate?

The first port of call for many clients that need to exchange currency is to approach their bank. Clients will often lose out by doing this, as bank rates are usually quite poor. By using the service of a specialist currency broker, you can often save in excess of 2 to 3%. When converting a large sum, this can save you thousands. When choosing a broker, ensure you are working with one that is fully authorised by the FCA. Registration usually takes a few minutes by completing a short online application. When the account is activated, you are then in a position to get a quote

I would recommend registering with two companies in order to guarantee you are getting the best price. There is very little point in registering with 4-5 companies, as by the time you call round and decide the best price, you may actually be in worse position than when you started as the market has moved! Many brokers will simply quote you the ‘mid-market’ rate, so make sure you are quoted an actual trading price. It might even be worth seeing if they can guarantee you a ‘fixed spread’. This way you will always know at what margin you will trade.

There are many benefits of using a broker other than just the exchange rate. By using a specialist currency broker, you gain access to multiple contract types. This can help safeguard your money transfer from adverse market movement. You will also find the process to be efficient and far less time-consuming than the banks.

Do you need to make a transfer?

If you’ve found this useful and would like to see what rate we can offer you get in touch here or email michael@currencyforecasts.co.uk

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