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We're a business with a US dollar account. Should we hold or sell?

The first thing to say is that Prime Cap is not the place to get a direct instruction to sell your currency today, tomorrow or at some time in the future. We aren't here to tell you where rates are going to go.

Sorry to start with a negative, but, we are not in the business of 'calling the market' for our clients.

This means we are not comfortable or allowed (from a regulatory perspective) to tell you to wait to do your exchange because we think the rate will be better some other time.

For one thing, it is not really possible to approach currency exchange in this way for SMEs or personal exchange activities.

Speculation of this type, for speculation it is, is reserved for regulated investment advisers dealing in currencies as an asset class.

If the broker you're talking to suggests they know something for sure, in terms of where rates will go, listen to the alarm bells that should be going off in your head.

An authorised payment institution and any of it's appointed representatives is regulated for payment services, not currency speculation - no ifs, no buts, no coco-nuts.


Having said all of the above, we give you guidance as to how to view the risks you face of rates going against you. And, let's remember that going 'against you' means you are able to buy fewer pounds with the dollars you hold.

It is a question of need.

What do you need dollars for and what do you need the currency you'd exchange those dollars in to for?


Take a UK business that allows it's customers to pay it in US dollars.

This business could be in any sector. They might be a subscription service, receiving a monthly payments for advice, copy, products or insight they sell around the world.

They might be an online retailer selling their wears to any and all global customers, and using an inbuilt converter in their website to tell their customer what the US cost of a UK based product is.

If you invoice in a foreign currency then it is up to you to decide what you do with that currency when it arrives with you. Selling your products and services in a foreign currency, whatever industry you are in, means you are lumbered with dealing with the conversion and use of those currencies collected.


Many businesses simply have any foreign currency amount paid to their UK held sterling account. This tends to be because they operate in sterling and haven't given any more thought to opening an account in the currency(ies) they're selling in.

Having a foreign currency paid to your UK sterling account means that the sterling amount you received is determined purely by your bank, who convert the incoming foreign currency in to sterling when the money arrives.

Hence, the sterling amount you receive could be very different to what you expect and it will also be very different to what you might have calculated when estimating the GBP equivalent of the foreign currency sales you have logged.


So, we will simply look at how best to make sure that you get the most pounds you can and we will talk about what simple over-the-counter tools you might find useful in managing your payments, your foreign currency earnings and your foreign currency expenses and payments.


The overriding sentiment, indisputable in fact, is that you will get a better rate of exchange for a specialist that you will from your bank. We caveat that by saying that some businesses are in a position to negotiate hard with their bank, but, SME's with turnover of £6.5 million or less generally don't have the leverage, plus, businesses with a turnover greater than this may lack the expertise to negotiate as effectively in favour of a better rate.

Leaving the exchange up to your bank will leave you worse off for any number of reasons. We go in to those reasons in others posts, but, for this post we will simply focus on what should be doing.

Opening a currency account denominated in the main foreign currencies you earn in is a very sensible option.

It doesn't solve the problem of giving you a better rate per se, but, it does give you control over when and indeed how your currency gets converted.

For businesses that do not want to open a foreign currency account, or for those companies that think they foreign currency earnings are too small and infrequent to justify an account that might carry a monthly fee, our segregated client account facilities can serve as a very useful, easy and free collection facility.

You can have your customer pay directly in to this account, or, you can introduce our currency account at the back end of whatever payment software you use to conduct your sales.

It acts as a silo and, provided you let us know what we should expect, who from and what amount, we can take care of applying the funds to your balance sheet with us.

You get notified USD, EUR, AUD or JPY has arrived in the facility and you can either login to convert it or talk to our brokers about other ways of approaching conversion of what you've collected.