The foreign exchange marketplace has regularly been in newspapers of late. Thanks to the large amount of speculative activity focussed on the euro and extreme amounts of euro investments sold, there have been increasing attacks on the market as a whole. Finance ministers around Europe have argued for an overhaul to the market, so that traders cannot make money from the credit problems of certain euro zone countries.
Regardless of whether you carry out direct foreign exchange investment, it is most likely that you will need to use the market at some point in your life. This can take place in one of a number of ways, including when you buy a home abroad, go on vacation or emigrate. In all of these examples, the forex market plays its part. For example, if you buy a house in Portugal then you shall be required to exchange currencies to be able to pay the local home loan. You could do this by popping into the nearest bank and requesting a currency transfer but there are now other cheaper ways of exchanging money between currencies.
One of the quickest and cheapest ways of transferring large amounts of funds between currencies is by using a foreign exchange merchant. There are numerous reasons for the lower cost, and the core one is focussed around the exchange rate that you, as a customer, are quoted. Firstly, mainstream banks offer their customers a rate which is much less appealing than the internal rate that they deal to one another – known as the Interbank rate. Currency brokers can offer much more competitive rates to you, because they deal solely and directly with the foreign exchange market. In addition they have far smaller operational costs than large financial institutions.
However, it is crucial to weigh up currency exchange brokers in order to get a good deal. There are many on the market, and they usually offer a separate service for their corporate and retail clients. Every day, they display the exchange rate for each currency pair – it is a recommended idea to check these before using a broker, in order to get the best rate. Any broker that deals with money directly must be fully regulated, so ensure that the company is approved by the FSA or the local equivalent. This means they have adequate measures in place to fight money laundering and other financial crimes.
No matter what your reasons for needing a foreign exchange service, it is worth keeping in mind that currency rates are volatile. As with the issues of the euro in recent weeks, currencies can fluctuate severely from one day to the next. If you are concerned about risk, a good quality foreign exchange broker ought to offer a range of risk management services. These aim to reduce your exposure to currency fluctuations on the foreign exchange market.