Brett Finnigan, who is the managing director of currency exchange specialist HiFX, answers some of your questions about foreign exchange.
KEY POINTS:
Q. How can I get the best deal when moving money overseas?
A. Consider your options. Many people think their bank is the only way to go about transferring money overseas. However, your bank may not offer you the most competitive exchange rate and charges can add to the cost of the transaction. Good currency brokers will offer competitive exchange rates and absorb any fees themselves.
Q. How do I know I am getting a fair exchange rate?
A. The inter-bank rate is when the wholesale market is pricing a particular currency - rates that a bank sells to another bank or broker. These prices can be viewed on websites such as www.hifx.co.nz, www.bloomberg.com or www.xe.com and are rates at which a bank trades with another bank or broker. The rate you receive will depend on where the inter-bank rate is and the volume of currency to be transacted. Checking these websites will arm you with the knowledge to ensure you are getting a fair deal.
Q. Is there a right and wrong time to move my money out of the country?
A. No one can accurately predict the foreign exchange markets, but by seeking the right advice you can save time and money. Currency brokers will monitor the markets for you and provide strategies to help you transact at the most beneficial time.
Q. Is there any way I can protect myself against exchange rate volatility?
A. Yes, there are a number of tools available to help protect you from adverse exchange rate movements. It is important to discuss your situation with a foreign exchange specialist, who will advise which contract best suits your objectives and time frames.
Q. But I don't have the time to keep an eye on the currency markets.
A. Currency brokers can do this for you. You might also want to consider using a market order, which is a handy tool if you are looking to achieve a specific rate of exchange. Should the market reach your pre-determined level, your currency is bought or sold automatically. Market orders are live 24 hours a day.
Q. I am moving overseas but my house has not yet sold. Is there anything I can do to avoid the risks posed by exchange rates?
A. Yes, many people believe they need to have their money physically available before conducting a foreign exchange transaction. Brokers can offer various strategies, such as a forward contract, buy now, pay later, or they can even offer a guaranteed rate of exchange for an upfront premium, similar to insurance. Many of these products can provide you with security and peace of mind over the exchange rate you will receive. It's important to discuss this with a professional before deciding which approach is best.
Q. What's the best way to send money overseas on a regular basis, and are brokers safe to use?
A. A regular payments abroad contract can help you fix an exchange rate for up to 12 months into the future. Done by direct debit, it guarantees you never miss a payment when repatriating funds or repaying your overseas mortgage. You should look for a reputable operator that can show a record of successful operations dating back many years. Ensure they are regulated and licensed by a regulatory body to provide foreign exchange to the retail market. Choose a broker who does not request you to send funds in advance of transactions and will pay you interest while holding on to your funds. Your broker should give you appropriate advice for your circumstances and answer as many questions as you need before you commit to completing a transaction.
