Individuals or businesses who have a need to make a large one off payment in a foreign currency can save on the cost of the transaction by engaging the services of a foreign currency broker regulated by the FCA (Financial Conduct Authority). Whilst it’s possible to facilitate a transaction through a bank, it’s highly likely that the service offered will be expensive due to the relatively high level of fees charged or poor exchange rate spread. An apparently small difference in an exchange rate can create a large difference in cost in absolute terms if the overall transaction is a large payment.
Foreign currency brokers use their market knowledge and experience to provide extremely competitive rates so whether your money transfer relates to the sale or purchase of an asset in the past or the future, there is a solution available that can save money. Existing funds can be converted using the most competitive spot rate but if a fee has been agreed and the paperwork is being finalised, then a forward contract will eliminate the risks associated with fluctuating currencies.
If an exchange rate was to vary by ten per cent during the time taken between agreeing a transaction and its execution this would materially affect the commercial viability of a transaction. At times of political or economic uncertainty, it’s quite conceivable that an exchange rate can move considerably within a period of a few days. It is not practical for anyone to accurately predict movements in exchange rate when negotiating a price for a transaction and the use of forward contracts removes the need to closely monitor exchange rates once an agreement has been drawn. The absence of uncertainty due to exchange rate fluctuations brings great benefit to business because the commercial success of a transaction can be established immediately. Transaction fees, which include amounts lost on a currency spread, do not bring value to an individual or company so their reduction is a positive step.
By making foreign exchange payments more efficient specialist foreign currency brokers are helping to create a market that is free from high transaction costs which place restrictions on trade.