The Big Foreign Currency Exchange Guide

If you’re going on holiday, buying property abroad or emigrating, you’ll need to engage with the world of foreign currency exchange. The currency market is one of the most volatile trading platforms in the world – which isn’t surprising given the amount of global developments which impact exchange rates. Most currencies experience movement in response to economic data, political shifts, social unrest and commodity price fluctuations. All this means that there’s a lot to think about when it comes to trading your Pounds (GBP) for Euros (EUR), US Dollars (USD), South African Rand (ZAR) or Australian Dollars (AUD).

currency broker

If you’ve got currency transfers to manage, getting to grips with the process is far easier with the help of an industry expert, so you may want to look into the different foreign exchange providers and see what they can offer.

You could use your bank or an institution like the Post Office to move your money abroad, but often specialist currency brokers can offer a better deal in terms of securing you a more competitive exchange rate and conducting your transfer on a fee-free basis.


Whatever provider you decide to use, there are a couple of points to bear in mind…


Exchange rates fluctuate rapidly and extensively

Exchange rates are never stable; they fluctuate all day, every day. An exchange rate is always attached to a currency pair, like Pound/Euro (or GBP/EUR). In this example, the Pound is the ‘base currency’ (the currency you have) while the Euro is the ‘quote currency’ (the currency you need). The exchange rate of the pairing tells you how many Euros are equivalent to one Pound. The volatility of the market is such that on Monday you may be able to get a Pound to Euro (GBP/EUR) exchange rate of 1.40 but a much lower rate by the end of the week. The UK may have produced some unfavourable economic data while reports from the Eurozone impressed, reducing the appeal of Sterling and increasing demand for the common currency. This situation could see the GBP/EUR exchange rate fall back to 1.35. The difference between these two rates may not seem like a lot, but if you were to convert a large amount of money the disparity would see you lose quite a sum. On a £5,000 transfer for example, you’d lose £250 by trading at the weaker amount.


Trading at the right time could save you thousands


currency trading

As the above example demonstrates, conducting your trade at the opportune moment is key, but how do you know if that moment’s arrived? Not even industry experts can predict currency market movements with 100% accuracy as so many unexpected things can happen. A terrorist attack, natural disaster, political coo or sudden economic meltdown could trigger extensive declines in the currency attached to the relevant nation. However, while some things are impossible to foresee, others are more dependable and foreign currency analysts can accordingly give you some insight into how exchange rates might trade based on forecasts for available data. If you’ve got foreign exchange requirements to manage, you may want to register for a free market update service with a reputable broker so you can stay on top of the latest developments. By doing this you’ll have more chance of taking advantage of a favourable exchange rate and give yourself the opportunity of safeguarding your transaction from an adverse movement.


Should transfers be conducted through a bank or broker?

The type of provider you use for your requirements should come down to which offers you the best deal and you can find this out with a little research. Something you might notice fairly quickly is that banks offer foreign exchange as a branch of their services and therefore aren’t specialists in the field. That’s where currency brokers have the upper hand; with some reputable brokers you’ll be assigned a personal Account Manager, an industry expert with the necessary know-how to give you invaluable insight into the market and help you pick the most opportune time to trade. Currency brokers spend the entire day monitoring exchange rates and can keep you abreast of the latest information via phone or email – so you never miss out on a favourable rate.

Additionally, brokers provide access to specialist services such as forward contracts, where customers can fix an exchange rate up to two years ahead of making a trade. This service can prove really useful if you need to budget for your transfer and want to know exactly how much currency you’ll receive. Additionally, if you need to make Regular Overseas Payments (ROPs), a broker can set you up with an account which automates your recurrent transactions at a commercial rate, fee-free.

The ability to secure a more competitive exchange rate is another factor which puts brokers above banks in terms of money-saving. If you choose to make a transfer with a reputable currency broker like you’ll be able to get a rate up to 3% more competitive than with the bank or Post Office. You’ll also avoid having to pay the fees tagged on through most other institutions.

Always make sure that whatever company you use to conduct your money transfer, is registered with the FCA as a Money Remitter and is therefore regulated to carry on those activities.

Before you decide how to transfer your money, get some exchange rate quotes from, see which option will save you the most money and seek the advice of industry experts.