A Guide to Utilizing a Currency Exchange Service. Newcomers Information on Foreign Exchange

The foreign exchange business has frequently featured in newspapers in the last few months. Thanks to high levels of speculation focussed on the euro and extreme numbers of euro positions sold, there have been ever more criticisms of the foreign exchange market in general. Politicians across the European Union have fought for regulatory changes to the market, so that traders cannot make returns from the economic problems of certain euro zone countries.

Regardless of whether you carry out direct currency exchange trade, it is probable that you shall require the currency market at one time or another. This might happen in one many ways, including when you purchase a property abroad, go on holiday or emigrate. In all of these cases, the forex market plays its part. For example, if you purchase a property in France then you will need to change currencies to be able to pay the foreign home loan. You can do this by visiting your high street bank and requesting a currency transfer but there are now other more cost-effective ways of exchanging money between currencies.

One of the quickest and cheapest ways of exchanging large amounts of money between currencies is by using a currency exchange brokerage. There are numerous reasons for the lower cost, and the most important one is centred around the exchange rate that you, as a customer, are offered. Firstly, traditional banks offer their customers a rate which is far less attractive than the wholesale rate that they deal to one another – called the Interbank rate. Foreign exchange specialists can offer much better rates to you, because they deal solely and directly with the foreign exchange market. In addition they have lower margins than big banks.

Nevertheless, it is crucial to weigh up currency exchange firms in order to receive a good offer. There are many available, and they usually offer a separate service for their corporate and retail clients. Each day, they release the exchange rate for each currency pair – it is a wise idea to check these prior to using a merchant, to secure the best rate. Any firm that deals with funds directly has to be fully regulated, so check that the company is monitored by the FSA or the local equivalent. This ensures that they have adequate measures in place to battle money laundering and other financial crimes.

Regardless of your reasons for needing a foreign exchange service, it is worth keeping in mind that exchange rates change often. As with the problems of the euro in recent times, currencies can change their values drastically from one day to the next. If you are concerned about risk, a qualified foreign exchange broker should provide a range of hedging services. These aim to drive down your exposure to currency movements on the foreign exchange market.


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