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International currency transfer contracts

I need to make a large currency transfer to France later this year, but I am not sure whether to use a spot contract or a forward contract. Which option would leave me better off?

There are lots of reasons why people need to move money abroad and a spot contract is great if you need to make an immediate transfer. You just need to specify how much you need to send and where you need to send it. Once you have agreed the exchange rate, simply send the currency provider the funds and they will make the transfer straight away. Your spot transfer will be conducted at bank-beating exchange rates, fee free.

However, if you are not ready to make a transfer yet, but are concerned the GBP/EUR exchange rate may weaken (a possibility considering that the second phase of Brexit talks is expected to be even more arduous than the first) forward contracts are a convenient way of defending against currency volatility. You can pay a small deposit and fix the current exchange rate for up to a year ahead of needing to make the transfer.

This means that you will know exactly how much your funds will be worth ahead of time (helping you budget effectively) and your transfer will be protected if the exchange rate suddenly drops.

Say you fixed the exchange rate at €1.17 in January 2017, with plans to make a £100,000 transfer in December. By the close of last year the GBP/EUR exchange rate had weakened to €1.12, so you would have saved €5,000.

While many people are better off as a result of a forward contract, the market can move both ways, so you need to be aware the rate could strengthen after you have fixed a rate, potentially leaving you worse off than if you had waited to use a spot transfer.

If you want to make sure you are making the most of your currency transfer to France, talk things through with the industry experts and stay up-to-date with currency news.

 

Question answered by Pippa Maile of Currencies Direct. For more information on international money transfers with Currencies Direct see www.currenciesdirect.com/france  or call +33 (0)4 22 32 62 40

If you have a query on this topic send it to news@connexionfrance.com 

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