Who sets the rates? Common questions about currency exchange rates

18-02-2021 | treasuryXL | XE |

Ever wondered where the rates come from, and how they can impact you?
We answer some common questions in this guide to exchange rates.

Who’s in charge of setting currency exchange rates? If you’ve ever sent money overseas or checked the rates, this is a question that may have definitely crossed your mind. Who decides what is the value of money, and why do rates fluctuate that much during the day?

It’s normal to wonder, and fortunately for you, we’ve got the answers to those questions and more.

How do currency exchange rates work?

Every country in the world has its own currency, and each of these currencies is valued differently. When you exchange one currency for another, you’re actually buying money, just in a different currency than the one used in your country.

The exchange rate tells you how much the currency used in your country is worth in foreign currency. The rates constantly change for some countries, whereas others use fixed exchange rates. As a rule of thumb, a country’s social and economic outlook is the main factor that influences the currency exchange rate.

That’s the quick answer. If you’re in the mood for a more in-depth look, check out our previous blog post.

What are the main types of exchange rates?

The main types of rates are variable (or flexible) and fixed rates.

Most countries have variable currency exchange rates, which are determined by the foreign exchange market. Because these rates are flexible, they fluctuate every minute, often influenced by market movements, political events, economic forecasts, and more.

Countries such as the U.S., the United Kingdom, Canada, Japan, and Mexico all use flexible exchange rates. It’s important to note that even though government policies can influence currency exchange rates, the government can’t actually regulate them. The rates are always determined by Forex traders on the foreign exchange market.

Several countries use fixed currency rates, and that is because the government dictates when the rates change. This is the case for the Saudi Arabian riyal, for example. The fixed rates are pegged to the U.S. dollar, and the central bank in the countries that use this system holds U.S. dollars to keep the rate fixed.

How do forex traders establish currency exchange rates?

The market forces of supply and demand are the main factors that determine currency exchange rates. The level of demand for a currency determines its value in relationship with other currencies. For example, if the demand for British pounds by Americans increases, the supply-demand forces will cause an increase of the British pound’s price in relation to the dollar.

The exchange rates between two countries are affected by countless factors, both geopolitical and economic. Some of the most common of them include:

  • Inflation reports

  • Interest rate changes

  • Gross domestic product numbers

  • Unemployment rates.

Forex traders take all these factors and more into account when establishing currency exchange rates. If a country has a strong economy that’s growing, investors will be interested in buying its goods and services, which means that they’ll need more of its currency.

On the other hand, when a country has an unstable economy, investors will be put off and less willing to invest, which means that the currency will not be highly valued. Investors always want to make sure they will get paid back before deciding to hold government bonds in a particular currency.

How do exchange rates affect you?

The value of money affects every individual on a daily basis, as the prices of essentials such as groceries and gas at the pump are correlated to it. When the value of money declines steadily over time, it causes inflation, and the result of that is a price increase for everything, including basic goods.

If you’re traveling or making a payment to another country that uses a different currency, it’s important to check for exchange rate values and plan your finances accordingly. Many people check whether the currency of the country of their destination is strong or weak before booking a vacation. That’s because a weak currency in the destination country means that you can buy more of it with your own currency, so you have more money to spend on your trip.

How can you get the best rates when sending money overseas?

As we’ve said before, unfortunately there’s no specific time where you can guarantee you’ll get a great rate. But there are a few things you can do to help yourself out.

If you’re transferring money to someone in another country, you need to look carefully at your options, as some transfer methods are more expensive than others. For example, if you’re using your bank to make a transfer, you’ll often need to pay a fee on top of the exchange rates set by the bank, which are usually disadvantageous.

By using an online money transfer service such as Xe, you can save money on fees and get great exchange rates. Your money will also reach its destination faster, and the entire process of making the transfer is easy both on the website and the mobile app.

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.

 

 

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How do Foreign currency exchange rates work?

11-02-2021 | treasuryXL | XE |

Ever checked the rates and wondered what’s happened to give you the rate you see? Here we break it down for you—and try to make it as simple and painless as possible.
If you’re traveling abroad for a holiday, need to pay for a school fee in another country or you want to buy an item from a foreign country,  you will need a currency exchange to carry out your transaction. But how can you tell the exact amount your currency is worth when it is exchanged into a foreign currency? And who’s setting them?

For the first question, you can easily do that on Xe’s Currency Converter. The second question? That’ll take a little more time to understand. We’ll try to make it as quick (and painless) as possible for you!

Currency exchange rates: what they are, and how they work

Exchange rates indicate how much your currency is worth if exchanged into a foreign currency. For example, on December 30, 2020, 1 U.S. dollar was equal to 0.748067 British pounds.

Currency exchange transactions happen 24 hours a day, seven days a week in a market that transact over $6 trillion a day. Exchange rates are constantly fluctuating as foreign currencies are actively traded. Various trading activities boost or lower the values of different currencies.

Institutions and traders buy and sell foreign currencies in the global market 24 hours a day. For a trade to be completed, at least one currency must be exchanged for another. For example, in order to buy the U.S. dollar another currency is required for payment. Whatever currency is used, either the euros, yen, or Canadian dollar, etc. will create a currency pair. For example, if you use U.S. dollars (USD) to buy the Japanese yen, the exchange rate will be for the JPY/USD pair.

How are international exchange rates determined?

Foreign exchange rates are determined in various countries using two key methods: flexible and fixed rate. While flexible exchange rates are constantly changing, fixed rates hardly ever change. (Though you probably figured that out from their names.)

Flexible exchange rates

The foreign exchange market or forex determines most currency exchange rates. These rates are known as flexible exchange rates. These rates are constantly changing from one moment to the next. Flexible exchange rates are influenced by the open market through demand and supply on world currency markets. As such, if the demand for a specific currency is high, the value of such currency will most likely increase. But if the demand of a particular currency falls, its value in the foreign exchange market falls too.

Most major global currencies often have flexible exchange rates. These include the British pounds, Mexican pesos, European euros, Japanese yen, Canadian dollars, and others.

The government of these countries and their central banks do not interfere to keep their exchange rates fixed. Though their policies can affect rates in the long run, for most of these nations their governments can only impact and not regulate exchange rates.

Fixed exchange rates

Countries that use fixed or pegged foreign exchange rates do so via their central bank. These countries set their rate against another major world currency like the United States dollar, euro or yen.

To regulate and maintain the fixed exchange rate, the government of these countries buy and sell their own currency against the foreign currency to which it is pegged. Only the governments of these countries can determine when their foreign exchange rates should change.

Countries that use the fixed exchange rate method include Saudi Arabia and China. These countries ensure that their central banks have sufficient amounts of money in their foreign currency reserves to determine the amount their currency is worth in the foreign exchange market.

Okay, but what causes the rates to change?

Rates change when currency values change. There are several key factors that affect the movement and values of local and foreign currencies. These include three key factors known as:

  1. Interest rates

  2. Money supply

  3. Financial stability

Due to these factors, the demand for a particular country’s currency, depends on what is happening in that country.

Interest rates

The interest rates a country’s central bank is setting is a key factor that will influence the country’s exchange rate. Higher interest rates have positive impacts on the value of the country’s currency. Investors are more likely to exchange their currency for one with higher interest rates, and then save it in that country’s bank to benefit from the higher interest rate.

Money supply

The money supply made available by a country’s central bank can influence the value of the currency in the foreign exchange market. For example, if there is too much money in circulation, there will be too much of it in exchange for very few goods.

Currency holders will most likely bid up the costs of goods and services which will trigger inflation. In the event that too much money is printed and in circulation in a particular country, it triggers hyperinflation and drives down their currency value in the foreign exchange market. Cash holders prefer to invest in countries with little or no inflation.

Financial stability

The financial stability and economic growth of a country can affect its foreign exchange rates. Investors are more likely to buy goods and services from countries with a strong and growing economy. This means they will need more of such a country’s currency to buy from them. this will increase the demand for such currency and ultimately boosts its value in the foreign exchange market.

If the economy of the country is in a bad shape, investors are less likely to trade with them. Investors are only interested in trading with countries that can provide gains from holding government bonds in that currency.

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

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How Do I Spot an Opportunity?

04-02-2021 | treasuryXL | XE |

There are a few signs and behavioral patterns that can indicate someone who would be a good fit to transfer money with XE.

Finding opportunities to turn prospects into Xe customers can be difficult. Though some people do have plans to transfer money overseas and may be in search of the right provider to facilitate their transfers, many other people as, and some may be perfectly satisfied using their bank or a wire transfer to send their money overseas. There are a few things that you can bring up in your discussions or keep your eyes (and ears) open for in order to make the search a little easier. Let’s talk about how you can find the right opportunities.

Spotting a potential opportunity

Though everyone is different, there are a few signs and behavioral patterns that can indicate someone who would be a good fit to transfer money with Xe.

There’s one question that reigns above all others: do they make international payments? This is the fundamental question, and the first one you should look to answer. Do they make international payments or deal with foreign currencies in any capacity? Then they are someone who could benefit from a fast, cost-effective, and easy-to-use money transfer solution.

Signs of a potential opportunity: individual edition

Individuals and businesses will have different signs, and different uses for money transfer. Some examples of people who fit this category include:

  • Clients living in other countries

  • Business people with clients who live overseas

  • Expats from another country

  • People who own property in another country

  • People who work with or get paid by a company in another country

  • People who have family overseas

  • People who have shares or dividends coming from another country

  • People receiving an inheritance, gift payments, or other sums of money from overseas

  • Individuals selling property with plans to relocate abroad

  • People purchasing goods from overseas

  • Workers on temporary overseas work secondments

  • People with overseas pensions

  • Account holders of multi-currency bank accounts.

Identifying someone who has a need for international money transfer is the first step. The next step is convincing them that they shouldn’t just use their local bank branch or the first provider they come across: they should use Xe.

There are two key areas to focus on:

  • Exchange rates

  • Bank costs associated with international payments.

Banks and other providers often set rates that favor themselves, not the client. In addition, these institutions often come with numerous additional fees (sometimes even hidden within the transaction). On the other hand, the Xe rate comes straight from the live currency markets, and is a true, honest reflection of the mid-market rate, with no hidden margins. In addition, there are no hidden fees with Xe: what your client sees is what they will get.

Signs of a potential business opportunity

Individuals aren’t the only ones who need money transfer; there are plenty of businesses who could benefit from working with Xe. Some examples of good opportunities include:

  • Clients with overseas offices

  • Businesses with a globally-located workforce

  • Managers of international payroll

  • Businesses that import or export

  • Offshore investors

  • Businesses with multi-currency bank accounts

  • Any business that sends and/or receives international payments.

Within the realm of international payments, there are a few common concerns that could be worth discussing further. Consider discussing:

  • Do they bill clients in your local currency or their local currency?

  • Do they talk about increased costs overseas, or decreased profits on exports?

  • Are they concerned with the bank costs associated with making international payments?

These questions can help you to better understand what they’re looking for from a money transfer and FX provider, whether it’s improving their profits, cutting out unnecessary costs, or ensuring that they aren’t exposed to FX risk when they make their international payments.

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

 

 

 

What’s Money Transfer really about?

21-01-2021 | treasuryXL | XE |

Don’t let the technical details overwhelm you. Online money transfer is a quick, simple, and secure process for any of your currency exchange needs.

Have you ever sent money via any means that doesn’t require walking into a physical bank to complete the transaction? That’s money transfer. It’s a simple process of receiving or sending money to a local or an international recipient without any physical cash.

Money transfers are usually available in two forms: payment and transfer.

  • When you use a debit card at a store or your boss gives you your paycheck through direct deposit, you’re experiencing small-scale money transfer.

  • When you’re sending money to another account or person, whether it’s across town or across the world, you’re also making a transfer.

There are four key types of money transfer services to choose from. These are:

  1. Wire transfer

  2. Online money transfer

  3. Bank draft

  4. Money orders

You can use any of these methods for local and international money transfers—but not all options are created equal.

What’s the difference between the four types of money transfer?

Wire transfers are one of the common money transfer services that you can use to transfer funds from one bank account to another bank account or to a cash office.

Online money transfer usually involves sending and receiving funds via an online remittance company (such as Xe) anywhere in the world. Users can easily transfer funds from their phone or their desktop computer, and watch them be deposited in their recipient’s bank account within days (or hours, or even minutes). Better still, funds can be transferred in almost all known currencies across the world.

Bank drafts are mostly used for making payments to companies or organizations abroad. A money transfer company or a bank can issue a bank draft and it is cashable at a financial institution. Bank drafts seem to be the most expensive type of money transfer. However, larger companies and institutions prefer using bank drafts because of their audit trail features and security.

To use a money order for sending funds, the sender is required to go to a cash office to create the money order for a precise cash office and recipient to pick up. All the sender has to do is notify the recipient about the money order. It’s the responsibility of the recipient to pick up the money order at the cash office.

What type of money transfer should you choose?

The easiest, fastest, and most reliable method of money transfer is online money transfer. It involves sending or receiving money anywhere across the world instantly via an online remittance service provider such as XE.

For a small fee, you can easily send money abroad to anyone including your spouse, friends, loved ones, colleagues, employers or even your own account in another country. The online remittance service provider you choose (hint, hint, we recommend choosing Xe) will complete the transaction via their secured web-based platform so your recipient can get the money in no time at all.

What makes online money transfer such a great method? Well…

Why should you choose online money transfer over the other methods?

These are the key benefits of sending money via online money transfer:

  • It’s fast, secure, and safe

How soon do you want your recipient to get the money you want to send over to them? If you choose an online money transfer service, your recipient will get the money quickly, making it the best choice when you’re on a deadline. Online money transfer isn’t just fast, it’s also secure and convenient. The process is simple and will take you just a couple of minutes on the phone or online, and your money and information will be secure during its trip around the world. Even more, if your money isn’t transferred or delivered for whatever reason, the money transfer company will inform you and help you to resolve the situation. If you ever need a fast, secure, and safe method of sending money or payments abroad, money transfer is the best option.

  • You won’t pay as much in service charges

Money transfer is the cheapest method of sending money to anyone or making payments either locally or abroad. If you choose the bank-to-bank method of transferring money or use a third-party agent, you’ll end up paying a lot of fees. This is mostly because banks and third-party agents have a larger overhead cost which they transfer to their customers in form of charges. And those upfront transfer fees aren’t the only extra cost—you’ll also get a worse exchange rate, and could be charged additional hidden fees during the transaction. Those costs add up!

In contrast, online money transfer service providers only charge a small sum, and you’ll always know what you’re paying before you confirm the money transfer. So, if you’re interested in paying a lot less for a faster and safer money transfer method, use an online money transfer service like Xe.

  • There’s no paperwork!

Did you just breathe a sigh of relief? Online money transfer doesn’t involve any paperwork. You wouldn’t have to bother about filling paper forms or stacking paper receipts as proof of transactions. You can easily complete all your transactions online without any paper and you can view your transactions history anytime you want. And as an added bonus, if you’re planning to send multiple money transfers to the same recipient, we’ll securely save their information (and yours) for quick transfers in the future.

  • You can get dedicated service

Have you ever had any reason to transfer money during an emergency in the middle of the night or while you’re busy at work? Going to the bank at such hours or even a third-party agent isn’t an option. But with online money transfer, you can easily initiate a money transfer at any hour of the day or night, without even getting out of bed. Online money transfer services have no opening or closing hours. Rather, they are available 24/7 to help you initiate whatever transaction you want. More so, customer support is often available 24/7 as well, making the online money transfer a more convenient option.

  • It’s efficient

If you decide to send money via a bank, here’s what you’ll have to do:

  1. Go to the bank. (Hope you remembered to get your recipient’s information beforehand!)

  2. Wait in line. (Who knows how long that’ll take?)

  3. Once you reach a teller, fill out the transfer paperwork. (Already sent a transfer to this person, at this location? Doesn’t matter.)

Online money transfers have no wait time, and no queues. You’re not required to leave the spot you are in or visit any location to make a money transfer. The entire process is easy, dependable, and efficient.

  • It’s user-friendly

Using an online money transfer platform doesn’t require any skill or knowledge. Rather, online money transfer platforms are user-friendly, easier to navigate and use for any type of money transfer without the assistance of anyone or a third-party. This makes the entire user experience a very positive one giving you the opportunity to complete as many transactions as you want.

Interested in sending money with Xe? Take just 3 minutes to see what you’ll need to do.

Why choose Xe Money Transfer?

  • Sending money via Xe is fast, convenient, user-friendly, and secure.

  • Money transfers are completed within 1-4 business days, but often complete within 24 hours (or less).

  • You’ll get competitive exchange rates for your money.

  • You can transfer money to over 130 countries.

  • You can download the Xe mobile app on AppStore or Google Play and transfer money on the go.

  • Enjoy expert customer support for all transactions and inquiries

  • No hidden fees.

When you make a money transfer through Xe, you can trust that your money will reach its destination quickly, securely, and with no hidden fees.

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

 

 

 

COVID-19 vaccine rollout: how might it impact global currencies?

14-01-2021 | treasuryXL | XE |

As 2020 drew to a close, news broke of multiple vaccinations for the COVID-19 virus, and each nation began discussing its plan for distributing the vaccine.

At this time, we are still in the early stages of the vaccine rollout, and many nations around the world are still in the process of vaccinating their highest-priority individuals and preparing for the eventual larger-scale distribution.

As some start to dream about a return to life outside of lockdowns and social distancing, others are wondering what the news of the vaccinations—and their eventual distribution—could mean for major global currencies and economies.

Has anything recently impacted the US dollar?

Several recent happenings have led to an impact on the USD.

First, the dollar may see a very short term sentiment impacted by Donald Trump’s removal from office. President elect Joe Biden has stated that he will announce an economic plan on Thursday, 14 January, to navigate through the COVID-19 pandemic and an eventual reopening. While the specifics of this plan are not known at this time, we do know that this plan will be worth “trillions” of dollars and will entail massive infrastructure spend.

Recent minutes from the Fed have shown us that the US Central Bank quantitative easing (QE), and that interest rates will continue to be low for the foreseeable future.

Finally, U.S. treasury Yields recently rose to 10 month highs.

What does this mean for the dollar?

The above events resulted in an end to the recent weaker dollar. Instead, the dollar has been strengthening against its major trading counter parties.

How are other currencies being impacted by the vaccine roll out?

The sooner a nation can widely distribute immunizations, achieve herd immunity and therefore see its economy back and open for business, the better it will be for their economy and currency.

It is currently estimated that once 70-90% of the population has been vaccinated, the sooner lock down restrictions and the “handbrake” on the economy can be released. Because of this, markets are tracking the current vaccine numbers and the planned numbers in the weeks and months ahead as an indicator of which economies will bounce back and which currencies will strengthen first.

Currently, the US dollar and the British pound are poised to see positive change. As of January 8, 2021, the United States ranks 4th in the list of vaccination doses per country, with 2.02 doses administered per 100 people in the population. The United Kingdom ranks 6th, with 1.94 doses per 100 members of the population as of January 3, 2021.

On the other hand, as a result of Europe’s comparatively slow start to the vaccine roll-out, the Euro currently appears to be in a vulnerable position.

What can you do?

If the past year has demonstrated anything, it’s that one can never predict what may happen. The most important thing that you can do is ensure that you’re prepared for market volatility and market motion in all directions.

 

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 multi billion-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 FX Providers Can Help Prepare You for Market Motion

07-01-2021 | treasuryXL | XE |

Currency market moves caught you off-guard? You’re not alone. By working with a knowledgeable FX provider, you can minimize the effects on your business.

Woman looking at financial graphs

No matter when you check, the currency markets are constantly moving. Currency values are subject to drastic change seemingly at the drop of a hat.

Volatility in the financial markets isn’t random; changes in currency values are a direct result of real-world factors. Examples of the real-world events that can lead to increases and decreases in currency values include:

  • Natural disasters

  • Recessions

  • Inflation

  • Interest rates

  • Political happenings

It’s not uncommon for the markets to have slower periods of muted volatility, low interest rates, and steady returns in equity markets. But on the other hand, drastic changes can strike seemingly out of nowhere.

Volatility in the markets can have powerful, tangible impacts on businesses around the world. Corporate finance departments, treasury groups, CFOs, and business owners will be the ones left to face the consequences.

What could this mean for your business? Volatility in the markets can potentially:

  • Raise import costs

  • Reduce export sales margins

  • Make your product less competitive

  • Possibly disrupt your business plans for 2020 and beyond.

Manage FX risk with Xe

Your corporation doesn’t need to wait until the markets have already started moving to take action. FX volatility is a risk you can manage, and comprehensive FX risk management measures can help your organization to reduce the impacts of market volatility and account for future shifts in the market.

Many organizations lack FX risk management programs. Some feel that FX risk isn’t a major risk to their organization, while others lack the expertise or resources to implement the effective measures that their organization needs. Partnering with a knowledgeable FX provider can help your organization to manage its currency risk.

At Xe, we have been operating in the currency business for over 25 years as a knowledgeable authority. We have extensive knowledge of the markets and comprehensive product offerings including FX risk management tools to to help you and your corporation manage your currency risk with expert, tailored solutions.

 

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 multi billion-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

 

 

 

What to know about receiving a money transfer

24-12-2020 | treasuryXL | XE |

Just like sending one, receiving an international money transfer is quick and simple. Here’s what you’ll need to know about receiving your money transfer.

Need to send money overseas? You’re in luck. There is no shortage of resources available to help people send money electronically across national borders. And it’s understandable: this process is often cumbersome and difficult to understand.

Now, if you’re receiving the transfer? Not so much. There is very little out there to help recipients. It’s almost like companies assume that recipients are financially savvy and they already know everything, or that receiving a money transfer couldn’t potentially be confusing for a first-time recipient.

At Xe, we assume nothing. We’re here to offer step-by-step assistance for both senders and recipients. Our mission is to complete international electronic funds transfers as efficiently as possible, and make the process as quick and easy as possible for anyone who needs to do it.

We’ll go into further detail below, but here are the basics of what you’ll need to know as someone expecting an international money transfer:

  1. Have a bank account

  2. Provide the necessary information

  3. Wait for the money to transfer

  4. Watch your bank account

1. Have a bank account

A significant number of readers took a deep breath when they saw that requirement. About one in ten American adults do not have a bank account. They only use cash or they only use prepaid debit cards. These alternatives are usually just fine, but an electronic money transfer is different. No cash changes hands, and the paying party usually cannot add funds to a debit card.

Most of these people are able to open bank accounts. The minimum requirements are not terribly burdensome. Instead, fear keeps many of these people from opening accounts. They are afraid their credit scores are not high enough or they are subject to a bank account levy order.

Yes, many bank accounts, especially interest-bearing accounts, have minimum credit score requirements. These minimum requirements are also rather high. However, many banks also offer no credit check bank accounts. Typically, these banks do not run ChexSystem reports either. So, the current bank does not know if you owe money to another bank. These accounts usually have rather high fees and other stipulations. But, even if you have the world’s lowest credit score, a bank account is probably available (though bank account levies are another matter).

2. Provide the necessary information

Many people do not like to share their personal information with anyone for any reason. We understand that attitude; there are quite a few scammers out there. However, if you want to receive an money transfer, you’ll need to give the sender some information. We can’t transfer money if we don’t know where to transfer it, after all!

The requirements vary according to the transfer platform. If you’ll be receiving an Xe money transfer, your sender will need:

  • Your name and address. Use your legal name (the name connected to your bank account) and not the name you go by. Furthermore, most financial institutions require recipients to have physical addresses as opposed to post office box numbers. This is for security and anti-money laundering purposes.

  • Your country. A no-brainer, right? But there are two Chinas and two Koreas. Some people live in breakaway republics, such as South Sudan and Tigray, that are not universally recognized. Many also people live in disputed zones which are claimed by multiple countries, such as the India-Pakistan border. Bottom line: the country must match the sender’s financial institution’s records.

  • Your bank information. We need to know it so we know where to deposit the money. This data usually includes:

    • Your bank name

    • Your bank account number

    • A SWIFT or BIC code (which you can get with a quick Google search)

If possible, try not to send this information via unencrypted cell phone text message. Use email or something more secure. And don’t forget to double-check your information, especially account numbers. It’s very easy to transpose digits or make another minor error that could have a big impact. If that happens, you’ll need to wait even longer to receive the transfer, and odds are, that’s not what you want.

3. Wait for the money to transfer

Domestic transfers are usually almost instant. We get nervous if PayPal takes more than thirty seconds to move money. A few international transactions are almost that fast, but most take more time.

Currency conversion accounts for much of this delay. There are many different currency markets that convert U.S. dollars to Mexican pesos, Italian liras to Russian rubles, and so on. These markets charge different fees. Frequently, the transferring financial institution looks for the highest price, adds that fee to the transaction, uses a lower-priced market, and pockets the difference.

Not so at Xe. Our international funds transfer fees are entirely transparent. Nothing happens under the table. So, you know how much money you are going to receive before the sender actually sends it.

Network infrastructure also accounts for some delays. Many banks have excellent services for their local customers, but they do not handle very many international transfers. These transfers are often risky, largely because of the aforementioned international recognition and boundary issues.

Once again, these delays are usually not a problem at Xe. International funds transfers are all we do, so we know how to handle them efficiently and securely (another reason why international transfers can take a little longer—we’re ensuring everything is secure before we transfer).

Generally, Xe transfers require between 1-4 business days to complete (though most transfers are complete within 24 hours, and some take just a few minutes). That’s about the same speed as a domestic PayPal bank transfer.

But you won’t need to resort to guesswork. When your sender confirms their transfer, they’ll be given an expected completion date, and update that time estimate if necessary by email. The sender usually has the most up-to-date information, so check with them!

4. Watch your bank account

International transfers are entirely electronic. We typically send alerts to senders when we begin processing transfers, if there are any hiccups, and when the transfer is complete. We normally also send completion alerts to recipients, assuming we have a good email address.

The best way to know when a transfer is complete is to watch your bank account activity. Occasionally, recipient financial institutions place holds on these transactions, but that’s between you and your bank.

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 multi billion-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

 

 

 

Countdown to January 1 — How a Brexit deal may impact the currency markets

10-12-2020 | treasuryXL | XE |

Uncertainty continues to dominate the value of GBP, and the next few weeks are a critical time for negotiations which could see the value rise or fall depending on the type of outcome.

The United Kingdom officially left the European Union on 31 January, but since that time has remained part of the EU while a final Brexit deal is negotiated. On 1 January 2021, those ties will be severed – and it would seem we are no closer to a deal which will impact trade and travel agreements.

This uncertainty continues to dominate the value of GBP, and the next few weeks are a critical time for negotiations which could see the value rise or fall depending on the type of outcome. Whatever the result of the outcome, it will likely cause movement in the currency markets, and lead to changes in the value of GBP (and potentially other world currencies as well).

Volatility in the currency markets can impact individuals and businesses alike. Are you prepared for what could happen? And what can you look to do if you need to make a currency transfer over the coming weeks?

What’s the current market outlook?

At this time? Hard to say.

If we look at how the market is predicting the outcome of negotiations, and remove any COVID-19 vaccine impact from the levels we see today, there is much uncertainty from economists and currency traders alike.

When there is a firm outcome, we can expect to see volatility in the market. Right now, there are several possible outcomes that we could see in the coming weeks, each one potentially having a different impact on the currency markets.

What are the potential outcomes, and what market impacts could they have?

There are a number of scenarios that could pan out over the following weeks.

1. A ‘bare bones’ deal covering key goods only

At the moment, the market looks to expect, in the very least, a deal regarding manufacturing. For example, trade agreements on goods such as food and pharma and this bare bones deal appears to be priced into the levels we are seeing currently.

Expected levels: Same as present

2. Extension of the transition phase

There could potentially be an agreement to extend the transition period rather than strike a hard ‘no deal’ outcome if negotiations reach stalemate. This could result in positive levels for GBP, which could then weaken as we navigate more uncertainty once again.

Expected levels: USD 1.3500 EUR 1.1200

3. No deal

If there is a firm ‘no deal’ outcome, there could be a significant shift in the value of GBP for the foreseeable future as we seek to understand the wider impact on EU trade and the wider economy.

Expected levels: USD 1.2700 EUR 1.0700

4. Deal agreed

If a deal is struck which leaves no stone unturned and all details covered, this certainty could result in a positive move for GBP which could be sustained well into the first part of 2021.

Expected levels: USD 1.4000 EUR 1.1700

What can you do?

There’s no predicting the future. The best thing you can do right now is ensure that you’ll be prepared for volatility in the currency markets, whichever direction the motion.

 

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 multi billion-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

 

 

 

What is the Interbank exchange rate, and why does it matter?

03-12-2020 | treasuryXL | XE |

Have you sent money overseas with a bank, or are you planning to? Then it’s important that you understand what the interbank exchange rate is and how it might cost you more money.

What is the Interbank exchange rate, and why does it matter?

In a survey earlier this year, 74.8% of you stated that you preferred using banks to send your money overseas (even if you used Xe to check the rates beforehand). Here’s the problem: the rates you see with Xe are not the rates that you’ll get when you choose to use the banks for your money transfers. And while we’ll get deeper into it later, we just want to let you know—the exchange rates the banks use will likely end up costing you more money.

Every foreign exchange and money transfer provider will have their own rates. When banks exchange money with one another, they use what’s called the interbank exchange rate. What is that, why do they use it, and what does that mean for you? Let’s explore that.

What is the interbank exchange?

The interbank exchange market, simply put, is where the banks exchange currencies with one another. It’s the top-level foreign exchange market. The Electronic Broking Service, which is a division of CES Financial, and Thomson Reuters are the two biggest names in the electronic foreign exchange market. This market is largely informal. There is no central trading location and no regulatory oversight body.

Central banks in different countries usually set domestic interbank exchange rates. Since the Federal Reserve is the closest thing to a central bank in the U.S., the Fed determines the exchange rate for transfers which originate in the U.S.

On any given day, the forex (foreign exchange market) handles about $5 trillion USD in transactions, making it the world’s largest financial market.

What about the Interbank exchange rate?

It’s exactly what you’d think it is—it’s the rate that banks use when they exchange large quantities of currency with each other. There’s no singular, universal interbank exchange rate—each bank can and will set their own rate, and the rates will naturally fluctuate in response to fluctuations in currency values.

Who determines the Interbank rate?

This fee, which can also be known as the spot rate, mid-market rate, or real exchange rate, often fluctuates minute by minute. In the United States, the Federal Reserve controls this fee, as well as the interest rate. In 2008, at the beginning of the Great Recession, the Federal reserve slashed the foreign transfer rate to .05 percent, in order to encourage funds transfer and investments. Since then, the prime rate has inched up to about 2.5 percent. But, as with interest rates, the prime foreign transfer rate is hardly ever available to consumers.

In everyday terms, the basic rule is that the Interbank foreign transfer rate is the midpoint between the selling rate and buying rate for a particular form of currency at a particular time. Currency brokers usually determine this rate, which is one reason is so subjective. Other factors which influence the fee amount include:

  • Bid-ask spread, which is a subset of supply and demand,

  • Domestic and foreign trade deficit or trade surplus,

  • Inflation and interest rates in a particular place,

  • Economic and political stability, or the lack thereof, and

  • Size of government debt.

Bad news on any of these fronts usually causes transfer rates to increase dramatically. Good news typically reduces the rate, but the effect is not as dramatic. So, based on this knowledge and the current official interbank foreign transfer rate, which a cursory Google search should reveal, you can estimate what the consumer rate should be. Use this estimate when you shop around to find the lowest fee.

In 2019, the Fed stated that it planned to keep the interbank exchange rate at 2.5 percent at least through 2021. The coronavirus outbreak might convince the Fed to reduce the rate. Or, the opposite could happen. The Fed could suddenly decide to raise the rate, largely based on the aforementioned factors.

These factors are important because the interbank exchange rate is not just a supply-and-demand issue. The Fed manipulates the rate to further its monetary policy goals. These goals could change quickly, as the Fed Board of Governors is populated by political appointees.

What this means to you

Technically, a few large international banks, such as Chase, HSBC, and Citibank, can offer their customers the prime interbank exchange rate. But this rate is only available to customers with excellent credit who make gargantuan transfers, like payroll transfers.

The aforementioned interbank transfer rate markup varies, but it is usually between 4 and 6 percent. If you regularly send money overseas, these nickels and dimes quickly add up to quarters and dollars.

Why is the interbank exchange rate marked up?

The rise of PayPal and other FinTechs, along with increased regulatory scrutiny, is expected to decrease banks’ income. Most likely, user fees will make up the difference. Domestic account fees, mostly NSF charges and non-bank ATM charges, make up the bulk of these fees. When it comes to foreign electronic funds transfers, the interbank exchange rate takes center stage.

Foreign electronic transfer fees are a bit like interest rates. The prime interest rate, which is the fee the Federal Reserve charges to loan money to banks, is always lower than the consumer interest rate. Since the Fed also sets the interbank exchange rate in the United States, the procedure is similar. The interbank exchange rate, which is the fee Wall Street bankers charge for huge funds transfers, is always lower than the consumer rate.

Generally, financial institutions raise the interbank exchange rate partially because they can, and partially because they fear the risks of international funds transfers.

The “spread”, and how it impacts what you get from your money transfers

Perhaps the most important interbank exchange rate fee might not appear in your transaction detail proposal or statement. The exchange bank works with currency bid and ask prices.

  • The bid price is the selling price,

  • The ask price is the buying price.

The difference between these two prices, which is often substantial, is called the spread. The spread allows currency brokers to buy your currency at a discount and sell it at a profit to a third party in another country.

The spread is like a surcharge which does not appear in the transaction detail. Assume you send $1,000 USD to Russia. The recipient probably expects to receive ₽7,650, minus the transfer fee, which is probably between 6.5 and 10.5 percent. That’s already a pretty hefty fee. However, because of the spread, your friend or colleague in Moscow could receive substantially less.

In many cases, brokers make more money off the spread than they make off the transfer fee. That’s especially true if it is a relatively slow day on the market, as are most Mondays, Tuesdays, and Wednesdays. During these periods, the lower number of buy-sell orders significantly increases the spread, at least in many cases.

Additionally, currency is the most liquid of all traded financial assets. Liquidity, or the lack thereof, is one of the most important spread factors.

 

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 multi billion-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

 

 

When Dealing with Foreign Exchange, Don’t Forget About Compliance

12-11-2020 | treasuryXL | XE |

What’s the most common problem in foreign exchange? It may not be glamorous, but one of the most common problems is regulatory delay—and it can have a major impact on your supply chain, cash flow, and relationships with suppliers and customers.

In the previous installments of our blog series on foreign exchange risk management, we’ve discussed several of the most common (and costly) mistakes that businesses make when making international payments and dealing with foreign currencies. Today, we want to take a closer look at regulatory compliance: what it is, what you need to do to be compliant, and what can happen to your business if you don’t take the necessary steps.

What do you need to know?

Financial institutions and other FX providers must comply with strict regulations while conducting foreign exchange transactions on behalf of their customers. Under know-your-customer (KYC) and anti-money laundering (AML) rules, they are required to verify the identities of all the parties they deal with, including the foreign parties with which your business may have contact. Additionally, there are overseas banking details to consider. While bank identifiers in the UK, for example, are standardised around account numbers and sort codes, the equivalents vary from country to country internationally. Depending on where you’re doing business, you may need to deal with data such as international bank account numbers (IBANs) and bank identifier codes (BICs).

The bottom line: your foreign exchange providers will legally require certain information so that they can transact on your behalf, and your business will need robust processes in place to generate said information and ensure that there aren’t any delays in business.

What happens if you don’t have the right policies in place?

Regulatory delay is one of the most common (and expensive) FX problems for businesses. If your business doesn’t know what it needs to do to be compliant and have policies and procedures in place to ensure that all business is up to regulatory standards, then you could see consequences. What’s the most likely outcome? Your payments won’t go through on time. Consider how that could impact your business, your cash flow, your supply chain, and your relationships.

What can an FX provider do?

If you’re not well-versed in everything you have to do to remain compliant while conducting business as usual, a specialist FX provider is the way to go. An FX provider can help you handle the various regulatory requirements and remain compliant in every country that you do business with.

For example, do you have online systems in place to automate data entry and quickly identify mistakes or missing information that may get in the way of your payments being made on time? Does your provider offer simple, easy-to-understand advice on the information you require from foreign counterparties and where to find it? Can you store payment details so you don’t have to keep re-entering them each time a transaction is due (and potentially leave room for human error)?

You don’t need to be an expert on regulatory compliance. However, if your business engages in any degree of foreign exchange, then you will need to pay special attention to regulatory compliance. If you don’t currently have the knowledge or resources to take care of compliance on your own, an FX provider is the way to go to ensure that your business won’t be disrupted by regulatory delay.

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 multi billion-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