Ongoing currency market volatility caused by Brexit has provided harsh and costly lessons for many expats, overseas property buyers and sellers, who did not effectively manage the FX risks.
The Brexit transition period comes to an end 31 December 2020. With or without an agreement the markets are expecting increased currency market volatility in the coming months. Hawk FX – International Currency Transfer Experts, set out their top tips for making sure you do not lose money to Brexit market volatility.
Banks – handy, but generally deliver bad exchange rates
Most commonly used for international payments, high street banks are generally not the best for securing a great exchange rate and protection against currency market volatility. Whether you are making a large final payment to complete the purchase of your property or making multiple payments to cover bills or transfer pensions, you can gain 2 – 4% extra on the same transaction.
Similarly, seasoned expats make the mistake of opening multi-currency accounts with their banks, moving funds between the accounts in the belief they are getting a great rate. The reality can be very different, and without any hedging in place, they get the rate on the day, good or bad.
At first sight, the savings on smaller regular payments does not seem like much. However, on a regular payment such as overseas mortgages or pension payments, the savings will add up over time, especially when you manage your FX exposure and take account of the transfer fees charged by the banks.
Stay focused on the exchange rate
You will see all sorts of offers, zero commission, fee-free transfers and Amazon vouchers. It is essential you stay focused on the exchange rate being offered, making sure that it is as close to the market rate. A small difference in the rate can have a significant impact on your savings.
Hedging your risks
Are you looking to make a large international payment to make at a point in the future, such as to complete a property purchase or expecting to repatriate investments?
If the requirement is within two years and you feel the current rates are favourable, then you can lock in the exchange rate for when you need to make the payment — simply paying a deposit to secure the rate for the amount you will need. Giving you peace of mind, knowing the cost when it becomes due.
However, timing your international payment for when favourable rates are available can be difficult. Another option is split your large payment into smaller payments at regular intervals, averaging the exchange rate over the period in which the transactions are made. Whilst the rates may not be the best, it will be better than half the market.
Get expert help and guidance
The perfect storm! Covid-19 and Brexit have caused considerable currency market volatility. During these times, specialist currency brokers deliver expert and experienced guidance on what is happening, what could happen, how it could affect your plans and what you can do to mitigate the risks. They distil thousands of points of market data into actionable and jargon-free guidance to protect you.