Having assisted clients to expand overseas and achieve their international trade goals, we are familiar with the common challenges and opportunities that are faced.
The challenges and risk from foreign exchange is one such area, and here, David Johnson of Halo Financial offers his 10 top tips to help you save money, manage risk and make the most of the foreign exchange aspects of your expansion.
For further details or clients requiring advice on foreign exchange, please contact us and we will be able to introduce you to Halo Financial and their team of foreign exchange brokers.
10 tips for foreign exchange…
- Speak with your bank about foreign currency accounts. Having accounts in relevant currencies offers greater flexibility over currency exchange and provides better control over payments and receipts.
- If you open an overseas bank account, check whether there are any receiving fees for inbound transfers. Some banks, especially Spanish banks, can charge a percentage of the transferred amount and that can run into thousands of pounds in extra costs.
- For Euro payments within Europe, make sure your bank or broker uses SEPA transfers whenever possible. These offer much lower costs than traditional wire transfers and are just as speedy.
- Start planning your currency requirements very early. Exchange rates move every second of the day and unexpected changes in exchange rates can be very costly.
- Shop around amongst banks and brokers for the best service. That doesn’t just mean the cheapest exchange rate. If you are new to currency matters, good guidance and access to market expertise will be invaluable. This is often lacking in online or call centre bank services and staff at your local branch are unlikely to be foreign exchange experts.
- Become familiar with the current state of the exchange rates that affect you. There are plenty of websites offering charts and news. You may prefer to speak with a specialist broker to get background information and access to historical exchange rate details.
- Make use of the market’s own tools and techniques. Stop Loss and Limit Orders are offered by some brokers which are excellent facilities to help you limit your risk and to take advantage of attractive exchange rates. Better still these usually offer 24 hour cover; essential in a market which never sleeps.
- Don’t think of your currency needs as all or nothing. It is often better to cover some of your requirements but leave room to take advantage of beneficial exchange rate movements as and when they occur.
- If the exchange rate is attractive today but you don’t need to exchange your funds for up to two years ahead, you can use a Forward Contract to set a fixed exchange rate in place for that period. Not all brokers and few banks offer this service but it may be worth seeking the facility for your needs.
- If your currency requirements are sizable and long term planning is required, you may wish to use Options. These allow you to choose whether to exercise your right to buy or sell at specified levels. They either cost a premium to secure or they are more complicated structures with positive and negative aspects. As a rule of thumb, if there is no premium, you need to ask, ‘what is the catch?’ There will be one and you need to know all the pros and cons before agreeing to the deal.
For further details or clients requiring advice on foreign exchange, please contact us in the first instance, and we can put you in contact with Halo Financial’s team of foreign exchange brokers.
The authors have made every effort to ensure commentary and factual information contained within this publication are accurate and current. The information/views expressed are not official statements of position, and should not be considered as commercial or technical client advice without seeking professional guidance. This publication has been prepared only as a guide. Any views expressed or advice given are those of the authors only and Rouse Partners cannot be held responsible for them.
