With all the uncertainty surrounding Brexit and the resultant fluctuations in the exchange rate, we thought it would be interesting to share with you this memo received from one of our currency partners, Foremost Currency Group, about the contracts they offer at present. If you’d like more information on this subject, please don’t hesitate to contact us or Foremost directly:
1. Spot Contract
Currency right now
The quickest, easiest and most popular way to buy and sell currency – you simply exchange one currency for another, whenever you need it. Simply send us the funds and, as soon as your funds clear, we’ll forward the currency to the designated account.
2. Forward Contract
Fix into the future
A forward contract can help protect against market volatility – useful for managing your budget. You can set the price now for a transaction that will take place up to two years in the future, allowing you to fix the exact value of the currency to be paid, regardless of market fluctuations. A forward contract is perfect if you don’t need to convert your currency immediately but you want to avoid the risk of sudden fluctuations in exchange rates.
You secure the forward contract with a margin of 10% of the total value of your transaction (you’ll need to pay this within two working days of agreeing the contract) and then pay the balance before the contract expires. Once secured, the agreed exchange rate will apply for the duration of the contract. See diagram below.
3. Limit order
Hold out for a better rate
With a limit order you specify the exchange rate you are hoping to achieve – which may not currently be available. Your currency will automatically be purchased should your rate become available as a trading level, meaning you get the price you want. This type of contract is a great way to buy foreign currency if time is on your side and you can afford to wait until the market moves in your favour.
4. Stop loss order
Protect against rates dropping
A stop loss order instructs your foreign currency broker to buy if the exchange rate goes below a pre-determined trading level. When combined with a limit order, you can hold out for a better rate while protecting yourself from a sudden fall in the market. This contract is perfect for budgeting and forecasting and can help protect against further losses.