FAQ - common questions answered
For many people the foreign exchange market seems difficult to understand. Some will only consider foreign exchange rates when they're about to go on holiday. However, if exchange rates impact directly on your life, the subtleties become important, particularly if you are an expatriate.
- We can help you understand the impact of foreign exchange movements on your overseas financial transactions, as well as your income, savings and investments.
- We can also help manage your foreign exchange risk, with our goal being to put you in the best position possible.
New to foreign exchange? We've posted some frequently asked foreign exchange questions below.
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What must I do to make a foreign exchange transfer?The rates shown on internet sites are usually “mid rates” for “interbank” transactions over £5,000,000. These rates are indicative rates half way between the buy rate and the sell rate.
The spot value is the value of the exchange at the current market rate. The exchange will be set at this rate even though the transaction will usually be completed in two business days time.
This is a foreign exchange set at a pre-agreed rate for completion on an agreed date in the future, anything from one week to one year forward. The rate is guaranteed however the foreign currency markets change.
HSBC Bank International has 0% commission on all foreign exchanges.
’Commission’ charged for foreign currency exchange is essentially a cash/money handling fee. Some companies/banks will charge either a flat fee or a percentage of the transaction (usually whichever is the greater) for making foreign currency transactions. The company/bank would then buy/sell currency to/from the customer margined against the interbank rate.
HSBC Bank International does not charge ‘commission’, therefore offering 0% commission on foreign currency exchange transactions
Charges do apply to foreign exchange payments made into other accounts View Fees
When you book a deal you have committed to go through with it. If you do change your mind you will have to continue with the transaction and book another deal to change the currency back.
For example, if you book an exchange where the bank buys GBP 100,000 and sells you USD @ 1.9250 for value 16th March:
You have to pay the bank GBP 100,000 on 16th March and receive in return USD 192,500 on 16th March.
The Bank would then do the exact reversal of the original deal (ie. Bank sells GBP and buys USD 192,500 for value 16th March), if the rate at this time changes to 1.9300 then there would be a loss for you because changing USD 192,500 into GBP @ 1.9300 would only generate GBP 99,740.93, resulting in a loss of GBP 259.07.
Once an exchange rate has been booked it is fixed and if you do not proceed with the transaction, you will be liable for any loss incurred to reverse the transaction.
You should be aware of the potential risk of investing in a currency which is not your base currency and the effect any change in exchange rates may have, be it up or down, when converting your returns back to your base currency. The underlying investments may be made in local currencies which are subject to exchange rate fluctuations when converting returns back to the base currency.
It is not a single location. It is made up of banks, companies and individuals trading in major centres like London, New York, Tokyo, Hong Kong. Banks and financial institutions have the most activity on the market with large speculative capital transactions seeking the best investment returns, and are responsible for the bulk of the deals.
Your foreign exchange risk starts from the date and time you have made a transaction to pay or receive funds in a different currency. It does NOT begin at the time you make or receive the payment.
For example if you agree to buy a property in the USA today based on an exchange rate of £/$1.85 with completion in 3 months, if the rate moves to £/$1.76 by the time you buy the house it will cost you 5% more sterling to cover the US$ purchase price.
It is normal for payments to be made for a value date of two business days in the future ('spot settlement'). Due to time zone differences, next day value is the earliest possible value date for most currencies as long as the payment instruction is received early in the day to give us sufficient time to arrange the transfer. Same day value payments are possible in some currencies subject to payment cut off times. It is common practice for banks to ask for sufficient funds on account prior to completing the foreign exchange deal.
