The transfer market

Friday, October 01, 2010

The transfer market

If you need to transfer money abroad, you'd be well advised to use a specialist currency broker – now regulated by the FSA – rather than a high street bank. We speak to five different brokers about the services they offer and quiz them about the strength of the Pound.

How currency brokers can help you

As well as offering better exchange rates and fewer fees than high street banks, currency brokers have a range of solutions, or contracts, to suit different client scenarios. The most common are:

  • Spot contracts These lets you fix an exchange rate with your broker on the spot. Although spot contracts let you buy currency as you need it, they are not recommended if you have a strict budget to stick to.
  • Forward contracts These are a type of 'buy now, pay later' solution that allow you fi x an exchange rate that will apply when you need to transfer currency some in the future, usually up to two years. They allow you to budget carefully and protect yourself against fluctuating exchange rates.
  • Stop loss and limit orders The former will protect you against adverse exchange rate movements and secure your currency if it falls below a pre-agreed rate; the latter is placed at the top end of the market to secure currency at a specific price that may not be currently available.These types of contracts allow you to aim for a higher rate while providing protection should markets move against you.
  • Regular payment solutions Examples include transferring pounds into euros on a monthly basis to cover overseas mortgage repayments or transferring a UK pension to an overseas account each month.

What the experts say...

Christina Weisz of Currency Solutions

CHRISTINA WEISZ
Currency Solutions
www.currencysolutions.co.uk

What are your most recent new services/promotions?
We recently launched our Prepaid Pocket Currency Card, which enables users to benefit from enhanced exchange rates with no fees and for those travelling overseas the card is a cost-effective, safe alternative to cash that can be topped up via text message or online.

Do you offer an on-line account service?
Yes, clients can log onto their secure account and make payments to new and existing beneficiaries.

What fees, if any, do you charge?
Transactions on amounts over £10,000 are free. Transactions of less than £10,000 are subject to a £10 fee.

What spot rate would you quote for £100,000-worth of euros at precisely midday on September 1?
Clients can call for a rate any time and we will provide a quote without an account – although we can only secure the rate for them if they are registered. If you were an account holder with us you would have received a rate of 1.2000 at 12pm on 01.09.10.

By this time (September) next year, will Sterling have strengthened, weakened or be at the same level against the Euro and Dollar?
Sticking my neck on the line there is the possibility that GBP will be slightly stronger than the Euro, but there are so many variables. Likewise with the US Dollar, an uncertain housing market and high unemployment figures mirror the uncertainty in the UK meaning I would expect GBP-USD to remain above 1.50.

Alistair Archibald of The Foremost Currency Group

ALASTAIR ARCHBOLD
The Foremost Currency Group
www.foremostcurrencygroup.co.uk

What are your most recent new services/ promotions?
Our three most recent new services are our SMS service, which means you are notified by text once your onward transfer has taken place. We have also launched our online trading platform which allows clients to trade 24 hours a day, seven days a week, 365 days a year. We have also just launched our new website with new analytical tools such as real-time graphs for 20 currency pairs.

Do you offer an on-line service?
We offer an online trading facility where clients can view live rates, and purchase currency 24/7, 365 days a year. This allows clients to purchase out of hours and take advantage of any spikes in the rate. Clients can also view full statements including all previous transactions online.

What fees, if any, do you charge?
For transfers under £50,000, we charge a £10 transfer fee. We waive this fee above £50,000. We don't charge any commission, and there are no hidden charges at all.

What spot rate would you quote for £100,000-worth of euros at precisely midday on September 1?
We always suggest having accounts open before obtaining quotes. The reason is that many brokers will only offer an 'indicative' rate if you don't have an account, which are often rather unrealistic, making comparisons impossible. With an account open ready to trade, you can be sure the quote you are offered will be achievable. At exactly midday on
01/09/2010 we completed an actual GBP/EUR trade at a rate of €1.2015 meaning £100,000 would achieve €120,150.

By this time (September) next year, will Sterling have strengthened, weakened or be at the same level against the Euro and Dollar?
We expect by this time next year the GBP will have strengthened against the Euro and US Dollar. However, we also expect that in the short to medium term, things are likely to get worse before they get better. We don't expect a return to the days of €1.50/$2.00 to the GBP, but after enduring some tough times over the remainder of 2010, we expect GBP exchange rates to have recovered to around €1.30 against the Euro and $1.70 against the US Dollar by the latter part of 2011.

David Kearns of Moneycorp

DAVID KEARNS
Moneycorp
www.moneycorp.com

What are your most recent new services/promotions?
We are currently running a promotion where clients receive a £25 Amazon voucher for referring a friend or family member, who would also receive a voucher.

Do you offer an on-line service?
Yes, we have a fully comprehensive online system for international payments and currency purchases. Our Global Payments Service (GPS) is secure, gives clients 24-hour access to live foreign exchange rates, and payments made by GBP debit card or bank transfers are cheaper than making a transfer via telephone.

What fees, if any, do you charge?
We usually charge a £15 transfer fee for clients using our telephone service, which is discounted to £10 for online payments made via GPS.

What spot rate would you quote for £100,000-worth of euros at precisely midday on September 1?
The GBP/€ rate of exchange on offer as at 12.00pm on the 1st September was €1.1930. Therefore £100K would buy €119,300.00.

By this time (September) next year, will Sterling have strengthened, weakened or be at the same level against the Euro and Dollar?
It is extremely difficult to forecast exactly where the GBP/Euro and GBP/US Dollar rates of exchange will be in one year's time, as there are so many unknowns, which could impact on the economic climates in the UK, the Eurozone and the United States.

Charles Purdy of Smart Currency Exchange

CHARLES PURDY
Smart Currency Exchange
www.smartcurrencyexchange.com

What are your most recent new services/ promotions?
Contact us for information on fee-free transfers, quoting A Place in the Sun.

Do you offer an on-line service?
Not as yet. But interestingly we have found a lot of clients coming to us from our competitors who have introduced online transactions because of the inflexibility and the poor pricing.

What fees, if any, do you charge?
£5 for transactions less than £3,000.

What spot rate would you quote for £100,000- worth of euros at precisely midday on September 1?
The rate we could have offered was €1.1978/£1 based on an Inter-Bank rate of 1.2020/£1, which equates to €119,780 [within the last 5 days you could have got over €122,000 if you had bought at the right time.

By this time (September) next year, will Sterling have strengthened, weakened or be at the same level against the Euro and Dollar?
Whoever knows the answers to the following questions may well be best placed to give
a prediction:

  • How the US economy will fair over the next 12 months?
  • What the effect of the austerity cuts will be on the UK economy over the next 12 months and will the UK government debt keep its AAA credit rating?
  • Will the Eurozone split up as a result of the high levels of its government and bank debt?

Perhaps I will stick with the Big Mac test which compares the price in US dollars of Big
Macs worldwide. Under this analysis the Euro is overvalued against GBP whereas GBP and the Dollar are about right. So my prediction would be GBP pushing up to €1.25- 1.30/£1 and staying close to US$1.50/£1.

David Johnsons of Halo Financial

DAVID JOHNSON
Halo Financial
www.halofinancial.com

What are your most recent new services/promotions?
As sponsors of The French Village at A Place in the Sun Live , we're offering £50 cashback to clients who open an account with us at the exhibition and trade over £5K in their first transfer.

Do you offer an on-line service?
No. Our offering is a consultative one. You cannot learn what is happening from the markets within a trading platform and we find that the vast majority of private clients prefer the hands on service we offer which helps them decipher all the market information and make successful currency decisions.

What fees, if any, do you charge?
£15 for transfers below £5,000 and free for above this.

What spot rate would you quote for £100,000- worth of euros at precisely midday on September 1?
To benefit from our foreign exchange services and exceptional rates you would need to comply with financial regulations by opening a trading facility, which is free of both cost and obligation. Only then can a client say yes to the exchange rate being offered. We would give Inter-Bank rate on that day at the given time, and we would explain that foreign exchange is no different to any other market – the greater the volume you exchange the better the price you can expect.

By this time (September) next year, will Sterling have strengthened, weakened or be at the same level against the Euro and Dollar?
We have seen a gradual rise in the GBP-Euro exchange rate from the €1.02 low in December 2008 to a test of €1.24 in June 2010. If that trend continues through the next year, we will be in a range between €1.20 (83.33p) and €1.32 (75.75p) by September 2011. Where we will be within that range on the 1st September is impossible to determine.

The US Dollar is bought heavily as a safe haven currency when investors are nervous of other markets and this effect has kept the GBP-USD exchange rate within a longer-term downtrend, which has lasted since the highs we saw in 2007.

If this trading pattern continues, we will be in a range between 1.22 and 1.39 by September 2011. However, the threat of a double dip recession in the US is the major talking point at the time of writing. If this materialises, the US Dollar would well weaken back to its 2009 highs around of $1.70. The GBP-USD exchange rate remains one of the most volatile currency pairs, making precise forecasting a rather pointless exercise.

Author

A Place In The Sun