Positive UK data pushes the pound higher

| 23-1-2020 | treasuryXL | XE |

Although based on XE’s previous article, the Sterling has been pressured since the beginning of the year resulting in the GBPUSD drop from the highs of 1.35 post-election to the levels of 1.2975, it seems the GBPUSD is recovering following the release of stronger-than-expected UK jobs reports.

Sterling gained yesterday following the release of stronger-than-expected UK jobs report, GBPUSD moved from 1.2980 up to 1.3050. According to the Office for National Statistics (ONS), the UK Average Weekly Earnings (Including Bonus) recorded a growth of 3.2% during the three months to November as compared to consensus estimates pointing to a modest downtick to 3.1%. The gauge excluding bonuses came in at 3.4% as against 3.5% previous but was in line with market expectations.

Other details showed that the number of people claiming unemployment-related benefits fell to 14.9K in December. The strong data slightly dented expectations of an interest rate cut by the Bank of England at its upcoming meeting on January 30 and provided a modest lift to the British pound. However, the markets are still pricing in about a 60% chance of a 25 bps rate cut. Moving forward the markets will continue to look towards the Bank of England rate decision at the end of the month for guidance on Sterling. Should we see rates on hold we could see Sterling strengthen considerably in the aftermath.

EURUSD has remained fairly flat and continues to trade just below the 1.11 level. It is a data light day from Europe and the US markets await employment data tomorrow for any significant moves.

GBPUSD – 1.3046

GBPEUR – 1.1776

EURUSD – 1.1077

The figures are based on the live mid-market rate, correct as of 08:30 GMT on 22/01/2020, and are provided for indicative purposes only. Live mid-market rates are not available to consumers and are for informational purposes only. The rates we quote for money transfer can be selected via the page on our website ‘Live Money Transfer rates’.

Source

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multibillion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

 

 

 

How to Get Started with International Money Transfer

| 16-1-2020 | treasuryXL | XE |

Do you ever get fed up with expensive service charges for the “privilege” of using your money? Do hidden international money transfer fees give you cold sweats when you log into your online banking account? Are the service charges imposed by providers like PayPal and Western Union making your heart beat faster?

You’ve worked hard all your life – to pay your bills, to provide for your family, and possibly to leave your home country to start a new life. Why should you pay exorbitant fees to move money in this digital age? There’s no need for armored trucks, planes, or boats to transport cash from you to the intended recipient of your money. Today, secure digital transactions are what gets money from one corner of the world to another.

Transferring money with a money services business (MSB) like XE eliminates the sorts of fees banks charge. You’re also assured a fair trade-able exchange rate on your money, based on the mid-market rate. (Meaning the mid-point between the buy-rate and sell-rate from international money markets.)

If you’ve heard this pitch from foreign currency transfer providers before, don’t worry, we’re just warming up here.

A Strategic Division of a Global Financial Powerhouse

XE, unlike many of the independent money services businesses in the marketplace, is a subsidiary of Euronet Worldwide, a leader in global electronic transactions and payments, and in facilitating payments between financial institutions, retailers, service providers and consumers.

We are entrusted by leading brands such as Google, Apple, Netflix and PayPal for their payments. Our sister companies facilitate payments for streaming media content, gaming, gift cards and pre-paid cellphones.

Our foreign currency market experts ensure our customers get the best value on money transfers to over 170 countries, in sixty currencies. Our consumer clients can transfer up to $500,000 (or your country’s equivalent denomination) from their accounts. There aren’t any monthly service charges or registration fees to erode your savings. Businesses can contract transfers of amounts exceeding $1 million.

The ABCs of International Money Transfer

If you’ve never contracted the services of a money services business before, here’s what you need to bring to the “table” before you even register for an account.

  • A bank account, and an original electronic copy of a bank statement
  • Government-issued identification such as a driver’s license, passport, or an age of majority card
  • An electronic copy of a utility bill, such as electricity bill or from a telecommunications company
  • An understanding of the approximate value of your foreign currency trading and transaction needs. These can help XE recommend services which maximize your return.

XE is mandated to collect these documents by the financial regulators around the world. They are used for the sole purpose of verifying your identity, and to defend the interests of XE and our clients against criminal activities like money laundering and to prevent the funding of terrorist activities.

There are further details about the terms of our service in the disclaimer below, and our Important information page.

It’s surprisingly easy to register for an account with XE, though if you need any assistance along the way, our knowledgeable customer success teams in our offices around the world are happy to assist you along the way.

Once you have registered for your account, and have transferred money to it from your bank, you can initiate a single transfer, series of transfers, or even mass payments to multiple suppliers or recipients. If you read on to the next section, you’ll learn about how you can take advantage of volatile market conditions to save money on overseas payments.

Services Which Distinguish XE from other MSBs

There are several overseas money transfer businesses in the market, and finding the ideal one for your personal or business needs can be challenging if you don’t know where to look. XE rises above the competition for many reasons in part because of our reputation for being easy to do business with. The proof is in our five-star rating on TrustPilot. Even our competitors regularly cite XE exchange rate data as the most accurate and reliable in the industry.

Some of the unique services which our customers rely on to mitigate costs include:

  • Forward contracts – which can lock in an exchange rate for up to twelve months, like recurring payments abroad for condominium fees.
  • Market orders – If you aren’t pressed for time on a specific payment, choose an exchange rate amount you are comfortable with, and we’ll initiate your payment for the moment the exchange rate meets that rate for your currency pair. These orders make the most of your money in turbulent times.
  • Spot orders for mass payments – Lock in on a rate for multiple payments at once for a batch of payments to multiple suppliers.
  • Risk management, cash solutions foreign exchange consulting and structured foreign exchange products for unique business requirements.

Time is of the essence in the currency market, much like in the stock market or in commodities trading. The services above provide some protections against unexpected peaks and valleys in the valuation of your local currency, though you should ensure you understand how upward or downward market movements can impact your scheduled payments.

Rate alerts via email are especially helpful to know when to trade when your base currency is at an optimal value relative to the currency you are exchanging for.

Money Transfer on the Go

There’s no denying that smartphones, tablets, and wearable devices are surpassing traditional computers for accessing digital content and getting things done online.

XE’s mobile apps for Android and iOS enable our customers stay up to date on exchange rates and make international payments without breaking stride.

XE is constantly developing innovative new channels and experiences for overseas money transfer. If you are evaluating XE relative to other money services businesses, don’t just take our word for it. Check out the review on money service provider review site Finder.com

Admittedly, XE is not:

  • The best choice for sending less than $1 (but who does that?)
  • Ideal for those individuals or companies not willing to provide identification before making a transfer. Yet, that’s contrary to international regulations in any case.
  • The money services business for those who want to pay on a cash or credit card basis.
  • The least expensive provider in the marketplace, nor are we the most expensive. You can’t beat us for value for your money though.

Whether you need to transfer rand to pay suppliers in South Africa, make a condo down payment in Dirhams to Dubai, or send krona to your sweetheart in Sweden, XE Money Transfer makes it easy and affordable.

 

Mark Burdon

Mark is a content writer, editor, and digital marketing specialist at XE, based in Newmarket, Ontario. Before joining XE, he worked with IBM, Open Text, TELUS and Canada Post.

 

 

 

 

Source

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multibillion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

 

 

 

Back to the old days: Currency jargon in forex trading

14-01-2020 | Marco Lassche |

Nowadays the youth use apparently ‘stacks’ as a nickname for money. In forex we use already for a long time nicknames…

 

Recently I heard my son talking to one of his friends on the play station: “Hey bro, we need more stacks to go to the next level.”

When I asked him what is stacks: “Dad come on, you don’t know? Maybe you are getting too old for this (41?). Everybody knows that stacks is money.” Ouch…
My ‘old’ brain went back in time and this felt a bit like my first steps in the world of FOREX trading. At that time no electronic forex trading platforms were used. We traded still directly with banks / brokers by phone or Reuters messenger. Instead of Bro we used Mate. Instead of stacks we used the nicknames for the different currencies. For me the first days it felt like I was ended up in a scene of the Tower of Babel.

“Hey Mate, I need a Cable (GBP/USD) in two”. Later on I understood, this meant I want a price quote for a GBP/USD in 2 million GBP at which you can buy/sell GBP against the USD.

Now you know that stacks is money, and a cable is GBP/USD, it is time for some more nicknames in currency (pairs), and some background explanation:

Please feel free to contact me if you need any further information or assistance in setting up a more professional framework for controlling your financial risks and cash management in a more efficient way.

 

Marco Lassche 

Founder and Owner of at Bedrijfskostenexpert
Treasurer and Project Manager at Van Caem Klerks Group
treasuryXL Ambassador

Currency markets impacted by a number of factors as we open a new decade

| 9-1-2020 | treasuryXL | XE |

The markets have been exposed to some real turmoil. In the wake of the tensions in the Middle East, we have seen a general decline of stocks and move toward typical risk on plays – treasuries are up overall, gold is trending higher and so is oil. Very generally there are a number of themes affecting the major crosses.

Let’s get up to speed and examine these broadly:

GBP:

On one hand, there have been an increase of investment monetary inflows based on economic data. Add to this a general sentiment of rate hikes from the Bank of England still being on the table and a very likely sense of uncertainty or even fear from European exporters with the ECB under a great deal of pressure to stabilise/raise inflation (and be inventive in doing so) and Italy dragging the boat down somewhat there is every opportunity for the trade items to play out in a buoyed GBP. There are a few ‘watch out’ aspects, though. These may include things like monetary policy having been kept on hold due to Brexit (and there could be a case to see the Conservatives attempt to waylay Bank of England’s efforts to raise rates) and the possibility that investors have priced a recession into investment outlook. When reviewing 17 institutional banks’ forecasts for 2020, the consensus is for a rate to the Dollar of 1.3400.

USD:

Again, a tale with two sides to the coin. The Federal Reserve has added liquidity to the repurchase market (short version of this mini-crisis is: that the amount of available cash in this market dropped exactly as the demand for borrowing jumped which made interest rates look outlandish – the added liquidity settles this and resumes a better velocity of money, or speed of funds flowing through the economy). There are still some divisions remaining in terms of the Fed’s outlook for rates, meaning that stabilising and stopping rate cuts isn’t technically off the table. The uncertainty in the Middle East in the clash between the States and Iran means that investors have flocked to the safe-haven currency of the Dollar and add to this some very real concerns about the strength of the global economy and growth forecasts, meaning that safe haven movement could have longer to garner flight to the Dollar all could point to a near to medium term robust USD. Temper this view with some very conflicting US economic data, muted inflation price pressures and China getting rid of bonds – which would force the States to increase its balance sheet.

EUR:

The EUR has had a short-term increase in currency strength versus the GBP, but this is largely from uncertainties of how trade will be arranged in finalising Brexit. There are widespread concerns that, if a deal may not be organised in the timeframe allotted, the UK could default to trading with the EU on World Trade Organisation terms, which are far less favourable than a direct agreement. As earlier mentioned, though, the EU has significant issues brewing in the form of inflation control via the ECB and from a very poor economic performance by Italy in the last 8-12 months in particular. There are green shoots of good news, though, with preliminary German consumer inflation figures looking far better than expected – a significant contribution to solving their issues given Germany’s size and relative impact on the bloc. All things said and done, against the context of uncertainty from geo-political risks and fiscal/trade uncertainties as well, the EUR could well be the net loser in the coming weeks.

Elsewhere in the world, the cost of the bush fires in Australia are touted at being ~$2bn AUD and climbing, but of course, the cost of people’s lives and the lives and environment for their unique and rich wildlife ecosystem will be immeasurable. Our hearts go out to the people of Australia and the brave service people fighting the disaster.

GBPEUR: 1.1800

GBPUSD: 1.3198

EURUSD: 1.1183

The figures are based on the live mid-market rate, correct as of 08:30 GMT on 07/01/2020, and are provided for indicative purposes only. Live mid-market rates are not available to consumers and are for informational purposes only. The rates we quote for money transfer can be selected via the page on our website ‘Live Money Transfer rates’.

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multibillion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

Exclusive interview with FX specialist Arnoud Doornbos about FX Risk Management

6-1-2020 | by Kendra Keydeniers | Arnoud Doornbos | Ilfa Group

On January 23rd, 2020 Ilfa and Global Reach are organising a masterclass on foreign exchange risk management. FX experts Michael Jansen of Global Reach and Arnoud Doornbos of Ilfa will guide you through the design of a FX risk management program and demonstrate which opportunities a program like this has for your organisation.

Go to event and register for the masterclass. Places are limited so we recommend to secure your spot today.

treasuryXL is delighted to share our exclusive interview with one of the organizers and FX specialist, Arnoud Doornbos of Ilfa.

What is Foreign Exchange Risk Management?

Foreign exchange risk management strategy or FX hedging strategy are terms used to define all the measures devised by businesses or investors to protect the value of their cash flows, assets or liabilities from adverse fluctuations of the exchange rate.

Hedging is used by companies to manage their currency exposure. If a company needs to buy or sell one currency for another, they are exposed to fluctuations in the foreign exchange market that could affect their costs (or revenues) and ultimately their profit.

By booking a hedge, companies protect an exchange rate against a specified sum of currency for a desired timescale, providing companies with certainty.

There are a range of products that can be used for hedging, depending on the companies objective and the exposure they are trying to protect.

Typically, a company would hedge their foreign exchange (FX) exposure to protect its profit margin from market volatility. Hedging is most common in companies that have an exposure to a secondary currency and have fixed prices on their products or services.

What are the types of Foreign Exchange risk?

Foreign Exchange exposure is classified into three types:

  • Transaction exposure deals with actual foreign currency transaction.
  • Translation exposure deals with the accounting representation
  • Economic exposure deals with little macro level exposure which may be true for the whole industry rather than just the firm under concern.

Currency risks can have various effects on a company, whether it operates domestically or internationally. Transaction and economic risks affect a company’s cash flows, while transaction risk represents the future and known cash flows. Economic risk represents the future (but unknown) cash flows. Translation risk has no cash flow effect, although it could be transformed into transaction risk or economic risk if the company were to realize the value of its foreign currency assets or liabilities. Risk can be tricky to understand, but by breaking it up into these categories, it is easier to see how that risk affects a company’s balance sheet.

What are the most common critical Foreign Exchange risk problems that companies make?

Businesses that operate internationally or domestically must deal with various risks when trading in currencies other than their home currency.

Companies typically generate capital by borrowing debt or issuing equity and then use this to invest in assets and try to generate a return on the investment. The investment might be in assets overseas and financed in foreign currencies, or the company’s products might be sold to customers overseas who pay in their local currencies.

Domestic companies that sell only to domestic customers might still face currency risk because the raw materials they buy are priced in a foreign currency. Companies that do business in just their home currency can still face currency risk if their competitors operate in a different home currency.

What critical elements of Foreign Exchange risk are often overlooked?

One of the critical elements of the currency risk that are overlooked is the correct identification of the type of FX risk. A distinction must be made between certain and uncertain cash flows in FX. With certain cash flows, the company has to deal with a linear risk that must be covered with a linear financial hedging instrument, an FX forward. With an uncertain cash flow, risk profile is not linear and it is dangerous to use FX Forwards to hedge. FX Options are better financial products to hedge.

If the company does not include FX Options in its Treasury policy, the second best option is to use FX forwards for, for example, 50% of the principal sum of the underlying risk.

Anticipated and committed exposure cycle

How can you measure Foreign Exchange risk and the different types?

There are many ways to measure foreign exchange risk, ranging from simple to quite complex. Sophisticated measures such as ‘value at risk’ may be mathematically complex and require significant computing power.

Register of foreign currency exposures

A very simple method is to maintain a register of exposures and their associated foreign exchange hedges. Basically the details of each hedge are recorded against its relevant exposure. This type of approach may also assist with compliance with accounting standards.

Table of projected foreign currency cashflows

Where the business both pays and receives foreign currency, it will be necessary to measure the net surplus or deficit for each currency. This can be done by projecting foreign currency cash flows. This not only indicates whether the business has a surplus or is short of a particular currency, but also the timing of currency flows.

To properly determine the FX risk, account must be taken of the differences in sensitivity of the incoming and outgoing FX cash flows.

Sensitivity analysis

A further extension of the previous measure is to undertake sensitivity analysis to measure the potential impact on the business of an adverse movement in exchange rates. This may be done by choosing arbitrary movements in exchange rates or by basing exchange rate movements on past history.

Value at risk

Some businesses, particularly financial institutions, use a probability approach when undertaking sensitivity analysis. This is known as ‘value at risk’. While it is useful to know the potential impact of a given change in exchange rates (say a USD one cent movement) the question will arise: how often does this happen? Accordingly, we can do a sensitivity analysis using past price history and apply it to the current position. Then, given the business’s current position, and based on exchange rates observed over the last two years, it can be 99 per cent confident that it will not lose more than a certain amount, given a certain movement in exchange rates. In effect, the business has used actual rate history to model the potential impact of exchange rate movements on its foreign currency exposures.

What steps do you need to make to create a Foreign Exchange strategy?

Transaction risk is often hedged tactically (selectively) or strategically to preserve cash flows and earnings, depending on the companies treasury view on the future movements of the currencies involved. Tactical hedging is used by most firms to hedge their transaction currency risk relating to short-term receivable and payable transactions, while strategic hedging is used for longer-period transactions.

Translation, or balance sheet, risk is hedged very infrequently and non-systematically, often to avoid the impact of possible abrupt currency shocks on net assets. This risk involves mainly long-term foreign exposures, such as the firm’s valuation of subsidiaries, its debt structure and international investments. However, the long-term nature of these items and the fact that currency translation affects the balance sheet rather than the income statement of a company, make hedging of the translation risk less of a priority for management. For the translation of currency risk of a subsidiary’s value, it is standard practice to hedge the net balance sheet exposures, i.e., the net assets (gross assets less liabilities) of the subsidiary that might be affected by an adverse exchange rate move.

Translation risk is for a large part a Finance issue. Within the framework of hedging the exchange rate risk in a consolidated balance sheet, the issue of hedging a companies debt profile is also of paramount importance.  The currency and maturity composition of a firm’s debt determines the susceptibility of its net equity and earnings to exchange rate changes. To reduce the impact of exchange rates on the volatility of earnings, the company may use an optimization model to devise an optimal set of hedging strategies to manage its currency risk.

What is, in your perception, the biggest benefit of a working Foreign Exchange strategy?

Foreign exchange risk management is thus fundamental but it is often considered to be too complex, expensive and time-consuming. Nonetheless, with a simple, tailored monitoring activity, it can neutralise currency fluctuations and bring the following benefits: Securing marketing margins. Optimising cash-flow estimates.

What is your best advise for companies dealing with Foreign Exchange risk?

This Forex market is open 24 hours a day, 5 days a week and with a daily volume of $ 6.6 trillion the most liquid and largest financial market in the world. For most companies, FX risks are non-core risks The objective of most companies is not to be an FX trader. By correctly identifying and quantifying the FX risks and then neutralizing them with the correct financial FX hedging instruments, companies will have little or no trouble with currency fluctuations on the financial FX markets. The implementation of the correct procedures forms the basis of good FX risk management and will make opportunistic behavior of management disappear.

 

Arnoud Doornbos

Associate Partner Ilfa

FX specialist

 

 

 

 

 

How to save time and money with International Payments

| 2-1-2020 | treasuryXL | XE |

Do you often need to make global transactions? Deciding when to make an international payment and at what rate can be critical. You constantly need to check the markets for the best rates and hope for a great opportunity. But what if you don’t have time to sit and wait? XE can help and take care of it. With a range of solutions to help you access competitive rates with greater control.

Spot Transfer

Need to make a payment right away? Lock your rate for immediate and quick transfers.

With XE you can buy currency at the live exchange rate. If you are looking to purchase currency and make a payment right away, then a spot contract could be perfect for you.

Get started

 

 

Market Orders

Flexible with your transfer time? Pick a rate, transfer automatically when the market hits your desired rate.

Get started

 

 

 

 

Forward Contracts

Secure a rate for future transfers. Transfer any time at your secured rate within 3 years.

Get started

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multibillion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

My Currency Fundamentals for SMEs

| 24-12-2019 | by Pieter de Kiewit |

My Very Practical Currency Fundamentals for SMEs

In 2016 I informed you about my baby steps in dealing with foreign exchange exposure in a “baby steps article” on this platform. I was about to receive Euros from Switzerland and had to pay in GBP (British pounds) into the UK. Two things I learned about the fees of big banks if you transfer internationally into another currency:

  1. There is a transaction fee if you transfer money into another currency, in most cases a flat fee;
  2. The bank takes a percentage from the total amount to make GBP out of Euro.

My solution at the time was to open a GBP account to avoid both these costs. There is a monthly fee for this bank account and some simple math showed that was the way to go. Currently GBP is relatively strong and I do not expect any UK assignments shortly, so I have decided to close down the account. Time to dig in again. I have struggled with three major considerations.

Transferring GBP into Euro: struggling with the spread

If you go onto the internet to find out what the current exchange rate between two currencies is, you get a number like 1 GBP equals 1.20 Euro. So far so good. Banks and other financial services providers work with a so-called spread. They deserve a reward for their services so the price they pay for your GBP is lower than the price you pay them if  you buy a pound from them. The spread is the percentage over and under the number you will find on the internet.

I am not here to endorse any businesses but I can tell you that the percentages can differ substantially. One provider asked 0.7%, the second 0.3%. The second provider does not charge a transaction fee, the first one does. If the amounts are substantial and your margins are thin, this difference can be substantially!

The hassle

When I choose for the second provider, I have to open a new account, remember new passwords, hand in documentation and think about if I can trust them. In short: a hassle.

With my first provider I have relationship of decades. I decided to ask them if there would be a chance that they would lower their prices. As I am a small business owner, I do not have a contact person anymore. I sent three emails to three different mail addresses. The first was not answered, the second was answered with “I cannot help you” and upon mail number three I received a call. The service agent mentioned she could not help me but I should call a colleague at 3:30 pm and then I would be put in the waiting line. Call me old-fashioned but that is not how I want to work. So that is what I told her. I noticed she really wanted to help but at the end of the day I got the message that my transaction was not in the millions so I would not receive an answer and there was no price-lowering. Ok.

I am not a fan of bank bashing and think they do important work. And we do not want to pick up every recruitment assignment. It is not in our interest but also not in the interest of the potential client. I would have appreciated a better line of communication.

The Market

As you might have noticed, I do like my cost savings but let’s be practical. This year the conversion rate GBP – Euro has been at its’ lowest at 1.06 and at its’ highest at 1.20. So there is  a difference of 0.14. The difference in the conversion rate has been 0.4%. I now chose to invest time in how to do the conversion and with which provider. Market study, good timing and luck are much better ways to optimize your returns.

Final remarks

If you, as an entrepreneur, have to deal with foreign exchange rates it is good to know how the cost structures of banks are. Also it is good to know there are alternative service providers like XE, Ebury, NBWM and Global Reach Group. If your time is limited and the number of transactions low, dig in once and decide what works for you. If you have regular and/or substantial transactions, it makes sense to keep the topic on the agenda. In that case it might be useful to gather further information and consider risk mitigating strategies and learn more about hedging, derivatives, spots, forwards, et cetera. If you want to, I can open my network for you.

Good luck and I would like to read about your experiences,

Pieter de Kiewit
Owner Treasurer Search

 

Possible Amendments to the Withdrawal Bill see Pound Fall Sharply

| 19-12-2019 | treasuryXL | XE |

Boris Johnson will bring his Brexit bill before a new intake of MPs this week without some of concessions he made before the election. The Withdrawal Agreement Bill – the key legislation that will pave the way for the UK to leave the European Union on 31 January 2020 – is expected to come before the Commons on Friday.

Under Johnson’s plan Britain is to leave the EU on 31 January once the bill passes, at which point the transition phase with the EU kicks in. During this period, the UK is expected to leave the customs union and single market and enter new negotiated arrangements, but will follow most EU law like other member states. However, it will not have voting rights like other member states.

News on the morning of the 17th has suggested that the Brexit bill is thought to have been rewritten since the one that was backed at the second reading by the previous Parliament. The Conservatives now  have a majority of 80 which means that Johnson is unlikely to bring forward concessions to his Brexit bill that he suggested he would consider at the time. Those include clause 30, allowing MPs to vote on an extension to the transition period beyond 2020 if a free trade deal was not struck in time.

With the new legislation looking to legally prevent delaying a departure beyond 2020 there is a risk that leaving with no deal is back on the table. This new amendment has seen the Pound drop over 1% against the dollar and the Euro. We are now back to the levels we were trading at before the election, with GBPUSD down from 1.35 on Friday to 1.3190 and GBPEUR down to 1.1846 from 1.20+ last week.

It is a fairly data heavy day today with UK average earnings, ILO employment data and Mark Carney speaking which could continue to see volatility in the Pound.

GBPUSD– 1.3190

GBPEUR– 1.1857

EURUSD– 1.1134

The figures are based on the live mid-market rate, correct as of 09:00 GMT on 17/12//2019, and are provided for indicative purposes only. Live mid-market rates are not available to consumers and are for informational purposes only. The rates XE quotes for money transfer can be selected via the page on XE’s website ‘Live Money Transfer rates’.

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multibillion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

treasuryXL announces partnership with XE.com

| 12-12-2019 | treasuryXL | XE |

treasuryXL announces partnership with XE.com, The World’s Trusted Currency Authority and provider of currency data, FX Risk Management and Technology solutions for businesses

VENLO, The Netherlands, DECEMBER 12, 2019 – treasuryXL, the community platform for everyone who is active in the world of treasury, today announced the premium partnership with the world’s most trusted currency authority XE.com.

XE.com is the first major currency specialist to work with treasuryXL. As a marketplace, treasuryXL will offer XE.com market commentary and insight to her audience. Offering a continuous flow of relevant treasury content, making treasury knowledge available, results in treasuryXL being the obvious go-to platform for its’ audience. The partnership kicks off with the new ‘Treasury Topic’ environment where XE.com will have a prominent role in the FX, risk management, payments and FinTech environment.

XE.com is the world’s most popular foreign exchange website, and a leading global destination for foreign exchange rate tools and data. XE Business Solutions support companies across the world with robust responses to unpredictable currency markets; whether they rely on XE for information about currency markets, seek support when managing their FX risk, or trust them with business-critical international payments.

treasuryXL and XE.com strive for a fruitful partnership where its’ audience are top of mind making sure that (potential) clients are always up to date with the latest global currency news and benefit from a comprehensive range of currency services and products. XE Business Solutions and currency expertise provide companies with robust responses to unpredictable currency markets, so that bottom line is protected by currency risk and not impacted by it.

About treasuryXL

treasuryXL started in 2016 as a community platform for everyone who is active in the world of treasury. Their extensive and highly qualified network consists out of experienced and aspiring treasurers. treasuryXL keeps their network updated with daily news, events and the latest treasury vacancies.

treasuryXL brings the treasury function to a higher level, both for the inner circle: corporate treasurers, bankers & consultants, as well as others that might benefit: CFO’s, business owners, other people from the CFO Team and educators.

treasuryXL offers:

  • professionals the chance to publish their expertise, opinions, success stories, distribute these and stimulate dialogue.
  • a labour market platform by creating an overview of vacancies, events and treasury education.
  • a variety of consultancy services in collaboration with qualified treasurers.
  • a broad network of highly valued partners and experts.

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multibillion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

How does a FX Forward transaction work?

| 27-11-2017 | treasuryXL |

A Foreign Exchange Swap (also known as a FX Forward) is a two-legged transaction where one currency is sold or bought against another currency at a determined date, and then simultaneously bought or sold back against the other currency at a future date. Normally this means the first transaction would take place at the prevailing spot rate and settle on the spot date, whilst the forward transaction would prevail at an agreed forward rate and settle on the agreed forward date. The difference between the Spot price (or first price) and the Forward price (or second price) represents the FX Forward and is expressed as Swap points.

What are Swap points?

Swap points represent the cost of borrowing one currency, whilst simultaneously lending another currency for a time period equal to the swap period. Swap points are therefore the cost of carry netted out between two currencies and used to adjust the existing Spot price to express the Forward price.

Worked example

Currency 1 ABC
Currency 2 XYZ
Period 6 months
Days in period 183
Interest rate 6 months ABC 4%
Interest rate 6 months XYZ  7%
Spot ABC/XYZ 2.1025

For ABC 1,000,000.00 there are XYZ 2,102,500.00

ABC 1,000,000.00 * (1+4/100*183/360)     = ABC 1,020,000.00
XYZ 2,102,500.00 * (1+7/100*183/360)      = XYZ 2,177,313.96

XYZ 2,177,313.96/ABC 1,020,333.33 = 2.1339

Swap points = +/+ 314 pips

What does this mean?

The Forward price of 2.1339 is higher than the Spot price of 2.1025 and means that the currency ABC trades at a forward premium to currency XYZ. Therefore, the Swap points of 314 pips are added to the current Spot price. A bank that is quoting would only quote the Swap points. A two-way quote would look something like 304/324. At 304 the bank would sell and buy ABC – spot against 6 months – against buying and selling XYZ. At 324 they would do the complete reverse.

So is the Forward price the same as a future?

No, the Forward price is not an attempt to determine the future value of currency ABC expressed in the price of currency XYZ. It is a price that is derived by notionally hedging the notional values of both currencies against their respective interest rates that are applicable at that moment in time. The Forward price is an example of interest rate parity – a state of non-arbitrage or equilibrium where traders are indifferent to either as there is no monetary advantage in either. Forwards are traded ‘Over the Counter’ and not via an exchange. Regardless of what the future value of spot ABC/XYZ is, once the trade has been executed there can only ever be opportunity loss or profit in the bookkeeping.

Variations

FX Forwards can also be forward starting – a client might wish to create/hedge an exposure starting in 4 months’ time and with a tenor of 6 months. This would be seen as a 6 month starting in 4 months’ time – or a 4m*10m. Such a Forward would be calculated from the present spot to both 4 months and 10 months, with the present Spot rate adjusted for the Forward price for 4 months to reflect the new starting price.

Alternatively, instead of swapping a position, a client might just wish to hedge their exposure/obligation in the future by trading ‘Outright’. If they were to buy ABC forward they would enter into a FX Swap (sell ABC at spot and buy forward) and then immediately buy ABC at spot, offsetting the spot leg of the FX Swap.

What moves the price?

Changes in the underlying interest rates of both currencies will affect the calculation. Also as the interest rate differential of the two currencies is expressed as a price of the existing spot rate, changes in the spot rate will also cause changes in the outcome of the calculation – though generally smaller than those caused by changes in interest rates.

Why trade FX Forwards?

FX Forwards allow a company to hedge future exposure/obligations. Once the contract has been struck that value is confirmed and is not subject to ‘mark-to-market’ variation orders as happens with an off-balance sheet instrument. An exposure in one currency can be transformed into another currency via use of a FX Forward. An expected inflow or outflow that is delayed can be rolled forward by using a FX Forward.

Lionel PaveyLionel Pavey

Cash Management and Treasury Specialist