Foreign Exchange Management

What is Foreign Exchange Exposure?

Anyone who has foreign currency needs is exposed to movements in the foreign exchange rates. This exposure needs to be understood and managed so you can minimise the impact on any future transactions.

Understanding your exposure

Your foreign exchange exposure can come from:

• Owning or buying an overseas asset for example purchasing a property abroad -  Info
• Long term investments in a foreign currency
• Being paid in a foreign currency
• Getting a lump sum in a foreign currency for example a bonus payment, inheritance -  Info
• Receiving foreign currency proceeds from a maturing investment

The level of your foreign exchange exposure will depend on:

• The length of time as to when you will receive/pay the foreign currency
• Movement in the exchange rate of the currencies involved
• The amount of the currency you will receive/pay

How you can manage your exposure

To manage your exposure you need to:

• Estimate your future foreign currency requirements
• Understand the different options for fixing the exchange rates -  Info
• Decide whether you want to fixed the rate for all of the currency you are going to receive or just some of it
• Contact us on +44 (0)1534 616162 to arrange fixing the exchange rates

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So what next?

When you have a foreign currency need you should consider either:

• Transacting at the time you need to move or convert the
  money with a spot exchange rate.
  
  The rate isn’t known until the day of the transaction so you can’t be sure what the rate will be. In the time between when you decide you need to convert your money and the day you make the transaction there will be changes in the exchange rate. This can mean you benefit from a better rate or you could get a worse rate, depending on how the exchange rates move, leaving you with less money than you expected.
• Choosing to fix the rate of your exchange
  
  As soon as you know you will need to make a foreign exchange transaction, you can fix your rate by calling us and booking one of the two types of forward contract.
  
  You will know the rate at which your transaction will be made at so you can plan ahead with confidence.
  
  You can take away the potential impact of the exchange rate moving over the period and remove the financial loss that would result from the rate going down.
  
  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.

Find out more about making a transfer

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