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| Last Minute
Won't Do It When It Comes to Currency Exchange |
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| June 2006 |
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| Lastminute.com
is one of the few dotcom companies that actually made it through into the
new millennium. Their offer is fantastic and captures the spirit of
the age. Of course it is more romantic, more fun, cheaper and more exciting
to do the spontaneous thing and book your trip last minute. This capturing
of the millennium zeitgeist made Lastminute.com a household name and if
they are not in the dictionary now, I’m sure they will be soon. People
‘lastminute’ their tickets in the same way that they now ‘Google’
information on the internet. |
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| But, while
‘last minute’ plans are great for holidays and flights, there are
some things which, as tedious as it sounds, are best arranged as far in
advance as possible. You might prefer to grab flights for a weekend
away at the last minute but probably wouldn’t drop everything on a trip
to the Himalayas and start to scale the west face of Everest in your deck
shoes. Unless you have a death wish, an undertaking on his scale requires
plenty of forethought, years of intricate planning, not to mention a decent
pair boots. |
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forethought and planning are what you must be well practised in during
your planned move to another country. From the visa application
to the accommodation arrangements and from the packing and moving of your
household furniture to the arrangements for your pets, there is always
something else to add to your ‘to do’ list and in my experience,
most migrants have more than one ‘to do’ list as well. In fact a
list of ‘To do’ lists might come in handy. |
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| When so many matters have to
be considered within the migration process, it is no wonder some things
get left to the last minute. One item that is often left to the last
second or even left off the list altogether is the small matter of converting
your funds into the currency of the country to which you are migrating.
This is such a major chance to save money if you plan the conversion early
enough. Sadly, because most migrants don’t have this fact highlighted to
them early enough in their plans, they leave the currency exchange until
they are closing their bank account in their home country and just instruct
their bank to move the funds en-mass to the new destination. |
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| And banks are delighted when this
happens. It means that the last act of their departing client is to write
them a blank cheque. |
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| By instructing their bank to send
their Sterling to Australia or their Dollars to England, the client is
effectively allowing the bank to set their own exchange rate. |
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| If you are ever unfortunate enough
to be in this position, just watch the bank clerk very closely; you
will see Dollar signs appear in his eyes and hear the unmistakable sound
of a Las Vegas jackpot siren behind him; corks will be popped and streamers
released as the bank makes yet another killing. |
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| And the reason for this euphoria
will be the fact that your funds will be converted at the ‘Rate for the
Day’; an exchange rate which approximates the rates tourists get for
small cash amounts and which conceals a huge profit margin. Unless customers
question the exchange rate, this is the rate that they will receive….or
suffer to be more precise. This will immediately secure a profit for the
bank of up to 4 percent and that profit is funded by you. I’ll leave you
to calculate the loss you would incur on your funds. |
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| If you want to arrive in your chosen
country to start your new life with as much spending power as possible
and you really don’t want to make your bank any wealthier than it already
is, then all I can say is, take a moment early in your migration plans
to write ’Halo Financial – currency exchange’ on the top of your
‘to-do’ list. |
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| Hopefully I can persuade you to
think about exchanging your funds in a way that benefits you rather than
the bank and you will be amazed at just how simple it can be to save money,
hassle and risk with the right assistance. |
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| There are two major ways to get
the best of the currency market. |
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| First it is best to buy your
currency as near to the level at which banks trade with other banks.
This is, perhaps unsurprisingly, called the ‘interbank’ rate and
is as attractive as the rate can get. Obviously banks trade with each other
in very large volumes so each transaction will usually be in excess of
£10,000,000 ($18.5 million). |
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| It would be great to be able to
get the same rates as banks agree between themselves but realistically,
as few migrants can boast eight digit wealth, only the very wealthiest
can expect to receive the interbank exchange rate. However, a specialist
currency dealer like Halo Financial will be able to get you very close
to this level and certainly far closer than the bank’s ‘rate for the
day’. |
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| Secondly, and far more importantly,
timing your transaction effectively will reap fantastic benefits. The reason
for this is that the currency markets are hugely volatile and that volatility
creates excellent times to buy currencies and excellent times to sell.
The trick is in knowing which is which and that is where the expertise
of a currency specialist pays real dividends. |
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| 2006 is proving to be one of
the most volatile times for the currency markets in many years and
the main reason for this volatility is the expectation for the path of
interest rates in the US, Europe, Japan and the UK. However, whilst volatile
prices are loathed by share markets, currency markets thrive on the ups
and downs of the exchange rates. |
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| As a trader who helps migrants every
working day, my job becomes so much easier when we see large spikes and
troughs in the exchange rates. |
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| With the Sterling-US Dollar exchange
rate rallying from $1.72 to $1.90 as it did between March and May 2006,
those with Dollars to buy, had only to wait a few weeks before getting
10.5% more Dollars for their Pounds. How many people do you know who would
prefer to receive $21,000 less when they arrive in the US? |
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| The decline in the US Dollar
had been boosted by the expectation that US interest rates, having
risen from 1 percent to 5.0% percent in less than two years, would finally
stop rising after the meeting of the Federal Reserve on 10th May. The head
of the Federal Reserve, Ben Bernanke, was pilloried for making a passing
comment to a reporter that said that the Fed may pause for thought at some
stage. The financial markets put two and two together and made seven as
usual; assumed he was talking about the immediate future and sold the US
Dollar as though their lives depended on it. |
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| Mr Bernanke tried to calm the waters
by claiming that he was misinterpreted and that he had no timescale in
mind but the damage was already done and the Dollar found itself abandoned
and alone. However, currency traders are a fickle bunch and when
US inflation and retail sales showed more encouraging signs during the
June round of data, the US Dollar rallied; pushing the Pound back down
to $1.8350. |
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| Now traders are expecting an interest
rate hike on 29th June and the debate is raging over whether this will
be the last or possibly the penultimate rate hike before US interest rates
stay on hold for a while. This uncertainty is fuelling the volatility that
has seen the GBP-USD exchange rate move by two and three cents in a day. |
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| Other currencies which have benefited
from the movements in the USD are the Yen, the Euro and the Pound.
There are other factors here though with the Eurozone economy picking up
generally and the German economy (30% of the total Eurozone) being
the greatest driving force in that equation. This may force the European
Central Bank to break the habit of a lifetime and move Europe’s base interest
rate. They have done so twice in the last year and the last move, which
was quite unexpected, served to strengthen the Euro across the board. |
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| The UK economy has been delivering
a series of negative economic statistics in the last year but the prospects
for the British economy are picking up. The rise in the cost of factory
gate goods and an increase in retail activity in April and May were matched
by a sharp rise in housing sales and this has created further demand for
the Pound which is keeping the Sterling-US Dollar and Sterling- Euro exchange
rates at these higher levels. |
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| All this has happened despite
the increasingly beleaguered state of the Labour government and this
slew of positive economic data is making the Bank of England think twice
about whether they should think about raising the UK base interest rate
before the end of 2006; a point that they reinforced in their press conference
on 10th May. |
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| The wild cards in all these manoeuvrings
are the expectation of interest rate rises in Japan and a revaluation of
the Chinese Yuan but I would need another 6000 words to do justice to all
the influences in this equation. |
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| So with so many factors to weigh
up, the only people who can possible hope to assess the effect that
these movements will have on your funds and to make sure you take advantage
when the exchange rate is in your favour, are the traders who sit and watch
exchange rates, data and charts all day. Thankfully, by using a specialist
currency company like Halo Financial, you can have access to just such
a group of people who’s role is to watch the markets on your behalf and
make sure that whether you need to buy or sell, when the market reaches
a level which benefits you, you are aware of it in time to take advantage. |
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| And if the exchange rate is fantastic
but the timing is not good for you, you can book a forward exchange
rate for a date which suits you rather than miss out. |
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| Equally, if the
exchange rate is not in your favour but is expected to move in the right
direction, a specialist dealer can place an instruction in the market to
buy your currency at a predetermined exchange rate wherever and whenever
that exchange rate is available. |
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| There are many ways to make the
most of your funds when moving them across borders but the most important
things to remember are to think about your plans early and speak to a specialist.
That way you can ensure you get the best of the rates on offer and you
don’t add your money to the next ‘record profit’ announcement by
your bank. |
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