| Just how
much could GW Bush alter your migration plans? |
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| October
2006 |
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| As
if moving to another country, changing your life and starting aging
wasn’t a momentous enough event, it is amazing how the words of a politician,
central banker or military leader can alter your financial situation during
this confusing process. |
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| Global
events may even be the start of your migration plans. Many migrants
move overseas in order to benefit from changes in economic conditions elsewhere
or to escape the employment or financial constraints of their home country.
Even as I write, the argument is raging over whether those in Bulgaria
and Romania who want to improve their financial lot should be allowed into
Britain when these countries accede to EU membership in 2007. The rights
or wrongs of the argument don’t and can’t alter the desire that we all
feel to improve our circumstances but the same politicians who are doing
battle on this matter might also affect your own migration plans in less
obvious ways. |
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| When
it comes to moving internationally, the exchange of your funds from
one currency to another, a matter which looks so very simple from the outside,
will be directly affected by the words of those politicians or the speech
from someone in authority in another country. You see, the currency market
from whence your funds are derived, is directly influenced by the words
and deeds of political and financial figures who only get reported in the
depths of the financial pages; pages, by the way, which you are well advised
to avoid if you want to stay awake. |
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| A central
bank which is in the throes of increasing the interest rate it offers on
investments will attract investors and strengthen the domestic currency,
making it more expensive for those who wish to buy it. A country which
embarks on a strategy of economic expansion through lower interest rates
might find that, for a short period, their currency is actually weaker
due to the lower interest rate yield but that will change when the economy
starts to heat up and interest rates begin to rise to ease consumer demand.
If GW Bush decides to wage more war, retreat from a war zone or even remove
himself from office, the markets will interpret the consequences of his
actions for the US economy and the effect that this will have globally
and then either buy or sell their US Dollar holdings accordingly. |
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| However,
the US Dollar seems to be rather attractive at all stages of their economic
cycle and whatever is happening on the political front because of the sheer
demand from US consumers. |
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| Knowing
whether the news is likely to strengthen a currency, weaken it, leave
it on hold, where the economy is within its cycle and where the currency
markets are likely to move to next, is the domain of the financial professional
so enlisting their help makes prefect sense. After all, you are already
involved in a momentous learning curve, understanding all the ins and outs
of legal, tax and visa requirements for your planned move; do you really
want to have to learn everything about the currency market as well? |
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| And converting
your funds looks pretty simple because most people will just amass the
funds from the sale of their house, car and non-exportable possessions
and then ask their bank to send the money to their new country. Easy; nothing
complicated about that and the funds will be delivered in the new currency
as instructed. The bank will charge a small fee and you move on to your
new life. |
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| But the small
fee is a bit of a red herring because the bank will also have made rather
a handsome profit from your funds and this comes in the form of a spread. |
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| A spread is
the difference between the exchange rate offered by the bank to those who
are planning to sell them a currency and the exchange rate they will apply
to contracts where that same currency is being bought from them. |
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| As an example,
check the Tourist rates on the screen at your nearest bureau de change
or bank foreign exchange till when you are next there. The Sterling – US
Dollar exchange rate will show something like $1.80 on the ‘We sell at’
side of the screen whilst the ‘We buy at’ side will show $2.03. That gives
the bank a profit of 10 percent on each US Dollar that they buy and sell. |
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| On cash
transactions, it could be argued that this is justifiable because cash
is so expensive to handle; security, counting, storing etc. all cost money
and time and the banks and bureaux will always be able to argue their costs
force the gap between the buy and sell prices apart. |
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| However,
when it comes to an international transfer, all the funds are moved electronically
and the only manpower issues are the checking and authorising of payments.
You would, therefore expect the exchange rate spread to be rather less
dramatic than the 10 percent on the tourist rate screens. |
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| Assume
nothing, question everything, as James Patterson wrote; if you don’t
ask the bank what exchange rate you are getting, (and most people don’t),
there is no incentive for them to reduce their profit margin at all. In
fact, even if you ask the exchange rate, they may not tell you because
in many cases, the rate is set when the funds are released and not before. |
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| That might
be two or three days later and the market can move two or three percent
in even this short space of time. |
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| And, even
if you ask the exchange rate and your are privileged enough to be told
what it will be, is this a good time to be making that transfer? Unless
you have watched the exchange rate every moment of the day and night in
the last year, you are unlikely to know and the foreign exchange clerk
at your local bank branch has no reason to be trained to understand the
market that lies behind their clients’ transactions. |
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| Might I
suggest an alternative which throws this whole arrangement on its head
and offers you the control that you should be entitled to. Speak with
a currency specialist like Halo Financial (no advertising intended of
course). A good specialist currency dealer should get to know what
you want to achieve, the timescale and schedule of the liquidation of your
assets and the planned date for your move. With this information in mind,
your dealer should offer you a sequence of options which will make your
currency exchange much more cost effective with little or no hassle. |
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| One of
the key difference between a good client-focussed specialist and a
bank is that you will receive information about the movements in the currency
market that affect your money and help in timing your transactions so take
advantage of the best exchange rate on offer within the time you have available. |
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| Mind you,
the currency market operates 24 hours a day, six and a half days a week,
so the chance that the best exchange rate is going to occur during your
local trading hours is pretty limited. |
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| No problem;
specialists in the currency market will offer you the chance to place an
order to achieve the exchange rate your would like whenever and wherever
that exchange rate is available. So, if you need to buy Euros with
your US Dollars and the EUR-USD exchange rate dives during far Eastern
trade but bounces back to the higher levels before America is open for
trade, you don’t need to miss that opportunity. |
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| And what’s
more, if the best exchange rate appears but its appearance doesn’t
happen to coincide with dates that suit you for your transfers – and let’s
be serious, these things rarely happen in miraculous synchronisation –
a good foreign exchange specialist will offer you the chance to grab the
best exchange rate but delay the actual exchange of funds until a time
that suits you. This is known as a forward contract and we find that it
is particularly welcome amongst migrants because it allows you to maximise
the gain you make on currency rather than suffering whatever the exchange
rate happens to be on the day you have funds available to convert. |
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| However,
if your funds are free, the exchange rate is fantastic and you need
to get money into your new account on the other side of the world, immediate
transactions (spot trades) can be undertaken within two working
days and sometimes as soon as the same working day dependent on the currencies
involved. |
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| So, if
you want to make sure neither GW Bush nor your bank costs you money when
you concert your funds for migration or any other purpose, speak with a
specialist currency dealer and save yourself some hassle, cost and complication. |
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