How to get the best exchange rate when transferring money

UAE expats should look carefully at foreign exchange rates and geopolitical events to avoid losses in money transfers.

Most expats here in the UAE will, on a regular or irregular basis, have cause to send funds overseas — most likely to their country of origin.

Others, perhaps due to their truly international lifestyle and expat mindset, will trade the foreign exchange markets as part of their wider financial strategy. Whichever category you fall into, or perhaps you are one of the increasing number who are in both, there are some factors that you would be wise to consider.

If you are making regular payments — for example, international mortgage repayments or you’re sending money to family back home, or you need to make a larger one-off irregular payment, it is always worth exploring the options of a forward pricing contract.

This will allow you to lock-in a rate of exchange in advance, meaning you will know the rate you will get on the day you make the transfer. This will help you avoid and manage exposure to volatility in the markets. The foreign exchange market is the largest liquid financial market in the world, with traders constantly exchanging currencies from all over the globe across local and international territories, and, as such, they are typically more turbulent than other markets.

Tracking the rates

If you haven’t or can’t lock-in an exchange rate with a forward pricing plan, it is important that you track the rates against the currency that are likely to most affect you. Even small fluctuations can end up making a big difference to the final value of the transaction.

To adapt that well-known Orwellian quote — not all foreign exchange providers are created equal; some are more equal than others. There are many to choose from, including banks and exclusive international payment specialists, each one is likely to offer something different in their products and services and each one will have different transfer fees. Banks, for instance, are likely to charge up to five per cent on your transactions. You’ll need to research the market, or, even better, speak to your financial adviser, to find out which option best suits your needs and is the most cost effective.

Seek advice

Due to the nature of the currency markets, there are always opportunities and risks in forex transactions. Seeking advice from an independent foreign exchange provider will help you take advantage of these opportunities and mitigate the avoidable risks. In the same way you would seek professional help from a lawyer on legal issues and a doctor on medical ones, it is recommended that you speak to an forex expert on matters of currency transfers and trades.

Every currency investor needs to be aware of bulls and bears in forex markets. In the simplest terms, if a currency is gaining value it is referred to as ‘bullish’; and if it is losing value it is ‘bearish’. There are opportunities to secure profits in both bull and bear markets. When the market is bullish, investors have more disposable money and will buy more, pushing prices higher. Any falls will be temporary and will soon adjust. Yet prices cannot increase indefinitely and investors must gauge the peak and then sell at that time.

When the market is bearish, prices are lower and investors can buy at bargain prices. Some short-term loss should be expected as prices will generally dip before they pick-up. With this in mind, the end of a bear market is the ideal time to maximise profits. Short-selling, meaning selling when a further price drop is not anticipated, is a popular investment strategy in bearish markets.

Explore platforms

An integrated online forex platform that offers a more competitive edge than most banks can be a useful tool. They are popular with traders as they can, in most cases, not only execute trades but monitor and analyse trading activity and develop more advanced trading strategies.

As we’ve mentioned, the currency markets are very volatile and are at the mercy of geopolitical events, amongst many other factors. As such, you need to keep up to date with important data releases and key economic and financial policy decisions as these will, inevitably, impact the market.

For example, looking ahead for the remainder of this quarter and into the third, in Europe the ECB’s bond-buying programme is expected to continue to devalue the single currency; whilst when the US Federal Reserve finally puts rates up, it will prompt further US dollar strength.

 

Source: Khaleej Times

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