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Convert foreign currency - Get the best exchange rate

 

Convert foreign currency - Get the best exchange rate

Get the best exchange rate

What goes up must come down is as true of the international money markets as the law of gravity. Obviously the larger the amount of currency to be converted the more the potential saving or loss due to movement in the currency rate but even relatively modest amounts can benefit from a better exchange rate. Given that nobody wants to pay more for purchasing a house, or anything else, than necessary, it is surprising that many still use their banks to convert foreign currency. How then to achieve the best exchange rate? Go through a specialist foreign exchange dealer has to be the answer. If time was no object you could simply ask a foreign exchange dealer to contact you when your desired rate was reached, which must happen sometime - mustn't it? This smacks a little of the attitude of certain French property owners who have an inflated figure in their head of the value of their house. They will set their price and then maybe even get their price, but it may take years. In the real world, though, people have dates and deadlines to work to - the house deposit needs to be lodged by next Wednesday, the purchase balance is due in four months time.

So you've chosen an exchange dealer and you can now trade in the firm belief that you have the best conversion rate possible. Maybe but maybe not! As a professional buyer I always recommend getting three quotes for any larger investment. Even comparing quotes between different foreign currency dealers can be financially worthwhile, especially for larger amounts such as a house purchase. The good news is that trading accounts can freely and easily be set up with exchange dealers and there is no obligation to trade. When your account is set up a simple phone call will enable you to get a quote and then trade with the dealer of your choice.

When we bought our place in France I set up three accounts with leading FX (foreign exchange) dealers. This was a straight forward and painless procedure and completing three applications at the same time did not feel like three times the effort. When our accounts were set up we were given a client reference number from each dealer allowing us to obtain quotes and trade as required. We agreed a conversion rate for the deposit of our house and transferred the money by bank transfer (via BACS) to our chosen exchange dealer's bank. The dealer did the conversion and in turn transferred our Euros direct to the Notaire's account. Nice and simple, deal done, well almost. There was still the small matter of arranging the balance payment. In our case our entry date was some 6 months away. I did not and could not afford the risk of exchange rates moving in the wrong direction for us and leaving us with a much more expensive purchase than originally envisaged. Happily, there is such a thing as the comforting "forward trade". This allows a client to agree a currency conversion rate now for a specific amount on a future date. Okay, the rates could have moved in a favourable direction and we may have ended up with a less expensive purchase, but I for one was not willing to take the risk. Knowing exactly what you have to pay in sterling has to be good news.

One other area where the services of a foreign exchange dealer can be extremely useful is for managing regular currency conversions. Perhaps you need a monthly sterling pension converted to euros and paid into your French bank account or have some other regular requirement to convert currency. Here again you can set an agreed rate, amount and dates with an exchange dealer of your choice. Whatever your foreign currency requirement, it always pays to get the best FX rate.

 

(Published July/August 2008)

 

 

 



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