It goes without saying that someone who is exchanging one currency for another wants to get the most money they can or exchange as small amount as they can to get the best in exchange. That is the nature of the game.
Using a specialist is the best way to improve the margin at which you can exchange, but, it might be worth thinking about some other contributing factors which on closer inspection serve as equally worthy considerations when assessing 'when' you should buy or sell a currency.
The first thing to say is that the right time to exchange one currency for another is often determined by some sort of deadline.
You might be buying or selling a house and so you know you need to have money with your solicitor by a certain time or date.
You might be using a specialist broker to pay for a holiday abroad, so, you need to make payments before departure.
Or, you may be sending funds to a friend in need, so, speed is of the essence.
At the end of the day, if you need to spend money in a different currency then that is primarily why you are exchanging, but, the deadline for when you want to begin that spending tends to serve as the main factor in determining when you exchange.
So, what about the time between now and that deadline?
You're taking with a firm like Prime Cap, hence you want to get the best rate of exchange available...but, it is three weeks before you need to start spending the money you're exchanging into.
Is there a better or worse time to exchange?
What might move the market in your favour or against you between now and your deadline?
You don't have your base currency liquid? (May be because it is only liquid once the property transaction completes?)...how do you make sure you're not worse off than today because the rate moved against you between now and when you complete?
These are just some of the questions we hope to answer.
Broadly speaking, it rather depends on what you need. What is the necessary outcome of an exchange?
So, when we say that every matter is different, we don't just mean that the surname of one client is different to that of another...we genuinely mean that what motivates you to exchange your currency for another will in fact be different to what motivates someone else.
Therefore, we need to work out what is most important to you.
Is it that you want the money, whatever the rate may be, to arrive on a certain day?
Could it be that you cannot afford for the rate of exchange to get worse?
If your great-aunt undergoing her third hip operation tomorrow, and her surgeon won't act unless her first two invoices are settled?
It could literally be anything, but, it has a distinct impact on when you should, could and would exchange your money as well as how. How might you 'settle' a transaction? What contract suits your needs? Whom do you need to communicate with after you have executed the exchange?
What is more interesting to note is that none of these questions will be asked of you either by you bank or an online transfer platform. Now, that may be as you want it, but, what happens if your overseas supplier doesn't want to receive from an account in the name of anyone other than you?
What happens if you're not sure this online transfer business has included the correct reference so that your solicitor or mortgage company can identify your money?
At the end of the day, as with most industries that deal in complex matters of personal finance, having someone at the end of the telephone can make all the difference, even if their role smoothes out the seemingly most trivial of concerns...
Back to the post title now...what are three things we advise you to consider when thinking about an exchange.
1. Ignore oscillations in the rate.
We say this only because watching it will not make it move in your favour and a tiny fractional movement up or down is in no way indicative of a trend.
Were we in a position to tell you to wait until tomorrow because we knew the rate of exchange would be better for you, we would charge you a whole heap more than we do. That kind of advice is not and should not be available to you from a company merely tasked with exchanging your funds. Please bear that in mind.
Whilst you may have found a broker who is correct in his guess as to where the rate of exchange is going to go, that is purely and simply luck. You could have been as lucky yourself and, for every time this broker was lucky, he will have taken umpteen punts and been way off. What's more, he is not allowed to try and call the market for you...so, regardless of whether or not his guesses prove correct, he is acting violation of his license.
2. Because no one knows, if you're not happy doing it all in one go, then, exchanging some of your money does in fact mean that the rest might be exchangeable at a better rate.
I don't think we could explain this much more clearly.
However, unlike with a share or a security of any type, breaking up currency exchange in to smaller more manageable chunks do not necessarily mean you're any more likely to exchange subsequent amounts at a better rate than the initial exchange.
Your not reducing your exposure to a worse rate by doing smaller transactions...because, each of those subsequent transactions face just the same risk of being exchanged at the same rate of worse than the first.
True, each has the same chance of being exchanged at the same rate or better, but, you're putting no more or fewer eggs in any one basket by holding back some of your funds.
3. Have you sent money to the intended beneficiary (the ultimate beneficiary of the transaction) before?
If you've not then we strongly urge you to consider the fact that your sending bank (the one transmitting your currency to us) may or may not suffer a hiccough or complication when sending funds to us, as well as the bank to which we send the currency you buy from us, if they've not received funds from you before, may or may not take longer to apply those funds to their account and progress the matter.
Many of our clients in the property space wait until the very last minute to conduct their currency exchanges.
They probably do this because they are waiting to see if the rate improves for them between when they engaged us and when they need to exchange. However many times out of ten, the rate has not improved by a sufficiently compelling margin to induce them to exchange, so they wait until the last day and get what they can.
Doing this leaves them vulnerable not to FX risk, but rather, procedural risk.
We work with phenomenally liquid bankers. They have a vast global presence and can receive funds satisfactorily from nearly anyone you care to suggest. Similarly, they can send funds to wherever. The issue is the processes and sophistication of the other banks involved in international money movement.
At the end of the day, it is simply foolish to wait until the day before you completion to conduct an exchange. For one thing, you're unlikely to see the rate movement you want and also you're risking delaying the very thing you're exchanging money for.
So, in discussion with our brokers we suggest you arrive at a cut-off date that gives you and us plenty of time to accommodate, investigate and work around complications that may or may not surface relating to the financial institutions at either end of the exchange process.