Whatever your situation, it is important to identify and minimise the risk of the market moving against you and decreasing the value of your capital. Our goal is to make sure you have all the right information and tools you need for emigration to protect yourself from fluctuating exchange rates.
Essentially your currency options depend on whether you have access to some or all of the funds you wish to transfer.
Let's assume that you are moving 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 Sterling 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. Note: we will send your funds to Australia for no charge and can even help you set up your bank account.
The high risk strategy would be to buy the currency at the last minute, just before you leave the UK, 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’ll initially be on a tight budget when you reach your new country.
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 can still 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 £50,000 worth of Australian Dollars but do not need to send them for 3 months, you can agree the exchange rate now, place a £5,000 deposit, and pay the remaining £45,000 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 24 months forward.
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 do 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 remainder.
A market order enables you to specify the exchange rate you want to achieve. When (and if) the market reaches a level where we can achieve your target we will automatically buy the Australian Dollars on your behalf. The minimum transaction amount for a market order is £20,000.
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.
Whichever 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 gambling and 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 once you have emigrated.