Our goal is to make sure you have all the right information and tools you need to protect yourself from fluctuating exchange rates. Your currency options depend on whether you have access to some or all of the funds you wish to transfer.
Lets assume you have recently migrated to Australia:
I have access to all of the funds – what are my options?
If you have access to all the funds you have two choices: one risk free and one high risk.
The risk free solution would be to sell all of your currency now, thus fixing the amount of Australian dollars you will own at the outset. This is called buying currency for 'spot'. You can then deposit the bought currency to earn some interest and send this to your new bank account(s) as and when you require it. We will send your funds to your account for no charge.
The high risk strategy would be to do nothing and buy the currency at the last minute, just before you need it, leaving you no option but to buy at the prevailing exchange rate. If the rate is going against you this could lead to some sleepless nights especially if you are on a tight budget when you first arrive.
I do not have access to all of the funds – what are my options?
If you do not have access to all of the funds at the outset you may want to consider securing a rate now to ‘play it safe’. The solution is to buy one or more ‘forward contracts’.
In essence, a 'forward contract' means that you can buy the currency now, and pay for it later. You will be required to pay a 10% deposit now and the 90% balance upon the maturity of the contract. For example, if you wish to buy ₤100,000 worth of AUD but do not need them for 3 months, you can agree the exchange rate now, place a ₤10,000 deposit, and pay the remaining ₤90,000 balance in 3 months. If the exchange rate moves at all in that 3 month period this will not affect you at all, as you have bought currency at the originally agreed rate. You may actually fix a rate on all your currency requirements up to 12 months forward.
Alternatively if you do not have the funds available to pay the 10% required for a forward contract you could secure an Exchange Rate Guarantee (ERG).
By taking out an Exchange Rate Guarantee with HiFX, you are securing the right, but not the obligation, to buy your currency at a pre-agreed exchange rate for a future date in time, by paying a premium (similar to an insurance premium). This means that you can fix the exchange rate now and decide on maturity of the contract whether the current market rate is better or worse than that agreed. If it is worse, you simply make a claim under the contract for the rate agreed. If better, you can transact at the improved current market rate
I have strong views about future exchange rates – what are my options?
If you have strong views about future exchange rates, you could wait to buy your currency. However, you are exposing yourself to currency risk. If you really believe that the rate will improve you could spread your risk by buying some of your requirement now (using a spot or forward contract) and then set what is known as a market order with your dealer for the remainding funds.
A market order enables you to specify the exchange rate you want to acheive. When (and if) the market reaches your target we will automatically buy the Australian Dollars on your behalf. For a full explanation of how market orders work, and how to spread your risk as efficiently as possible please ask one of our team.
Which ever option you decide is right for you please remember:
Without fixing the exchange rate or taking out a 'forward contract' at the outset, you are risking your future wealth. Until you actually buy the currency, you will have no idea how much money you will have to spend on your new house, car, etc.
For further information about the financial products we offer please refer to our Product Disclosure Statement
, or call us to discuss which option is right for you.