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Currency Transfer Options That Can Save You Money

Currency Transfer Options That Can Save You Money

If you are intending to send money to an overseas destination at some point in the future, there are a number of different services that some brokers provide that are worth considering.  The timeframe you are working within and your risk appetite will help determine which of them are right for you.

Forward Contracts

A forward contract allows you to pin the currency rate of a future transfer to today’s spot rate.  This is perfect if the exchange rate is particularly favourable at a given time and you think it will be less favourable when you need to actually make your transfer.

Forward contracts are available through most currency brokers these days.  Tor FX is worth considering as you only have to place a 10% deposit to secure your rate with them and you can book the contract for anywhere up to 24 months in advance.

Limit Orders

If you have experience in share dealing or other types of investing, you might have come across limit orders.  A limit order is simply a facility that automatically buys the currency you require when it hits a rate you pre determine.

Example:   John and Liz are emigrating to Australia in 12 months’ time and although they are happy with today’s rate of exchange, they think that the Dollar will weaken over the period.  They decide to set a limit order to transfer their currency into AUD once it weakens by 10%.  Three months later, the dollar does in fact weaken, their order gets filled and they are very happy to have an extra 10% to emigrate with.

Stop Loss

A stop loss works in the opposite way to a limit order and is suitable for those people that want peace of mind that their rate of exchange won’t drop below a certain point.  It is possible to set the minimum rate that you are willing to transfer at in case the market reaches this level.  A stop loss is ideal for those people that are working towards a strict budget and cannot allow, or would feel uncomfortable if the rate was breached.

Example:  Mr Humphries is completing on a house purchase in France in six months’ time.  He is happy to wait to see if the Euro weakens against the currency he holds to see if he can save some money.  Having said this he doesn’t want to end up paying more than he can afford.  He decides to setup a stop loss that will buy the Euros at the minimum rate that he is comfortable with – if the market reaches that level.  The Euro rate does in fact go against him horribly but the stop loss kicked in and he bought the Euros at a reasonable rate that was much higher than where it was after the six months.


Typically, an ‘option’ is a contract that gives you the

right – but not the obligation – to exchange money

at a pre-agreed exchange rate on a future date (both

specified by you). You are not obliged to deal at

the pre-specified rate and can choose to deal in the

spot market if the spot rate in the future is more

favourable. However, for the extra flexibility that

foreign exchange options can provide, there is a cost

to purchase these contracts in the form of an up-front

premium. This premium is non-recoverable.

In many ways, simple (‘vanilla’) options act like an

insurance policy* – you pay a premium to provide a

‘worst case rate’ (the strike rate of the option) but you

have unlimited upside if exchange rates move in your

favour. Foreign exchange options can be taken out on

justify;”>any major currency for a period of anywhere between

one week and two years.

If you have any questions on the contract options we have discussed above then you might want to talk to an expert.  Moneycorp is the leading Private foreign exchange broker and can be reached on 20 7589 3000

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