Which Currency Exchange Product is Right for You?
11 September 2019

Not everyone has the same priorities for exchanging foreign currencies. In some cases, time is of the essence, while for others, a transaction needs to be carried out on a specified date. At other times, there is no immediate rush for the exchange to take place, making it possible to wait for the market to achieve a preferential exchange rate.

At Privalgo, we offer a wide range of foreign currency exchange products suitable for all of the scenarios above.

Spot

If you are planning on carrying out a transaction almost immediately, the spot rate is what you should look for. As the name suggests, this type of contract gives you a price on the spot.

In contrast to forwards (see below) a spot contract is delivered almost instantly and is typically used for transactions no further than two days away.

Spot rates are the simplest form of foreign currency exchange products. Once the spot rate has been offered for the relevant currency pairing, a binding contract is created. “Buy now, pay now” is the easiest way to describe a spot contract.

Forwards (open dated and fixed date)

There are many scenarios that involve carrying out transactions in the future but the foreign currency market has a high degree of volatility, leaving little room for certainty in calculations. This can be hugely problematic, as even a small swing in exchange rates can change the value of the transaction adversely.

A forward contract provides protection against changes in market exchange rates and ensures that future transactions can be carried out at a predetermined rate. For business transactions or large purchases such as property, having a fixed exchange rate can be essential.

Although the contract may not be completed until some time in the future, it is a binding obligation. The forward locks in the agreed exchange rate, even though the transaction is not carried out instantly. There is a small charge for this service and a deposit is paid upfront. However, the full balance of payment is not required until the completion of the forward contract.

The exchange rate agreed upon in the forward contract is protected, regardless of the way the market moves. This can provide significant savings if the exchange rate moves adversely. By contrast, a forward contract can also end up being more expensive if the market moves the opposite way. The forward must be paid for and completed, even if the spot rate in the future is better.

Where security over the end price is vital, a forward contract is an excellent solution. There are two types of forward contract: fixed dated and open dated. Fixed dated (sometimes known as closed dated) are carried out on a date that’s pre-determined in advance. An open-dated forward can be carried out on a date specified later (but still falls within an agreed range).

Market Order

If there is more flexibility over foreign currency transactions, a market order provides an additional option. This allows the rate of exchange to be specified, even if it’s not currently available.

When a market order is placed, the deal is executed for the agreed funds as soon as the exchange rate becomes available. There is no guarantee that the exchange rate will ever become available, but the broker can help advise how to choose a suitable price.

Here at Privalgo, we don’t charge fees for market orders, and unlike forward contracts, they can be cancelled at any time before execution. Once you place a market order, we will automatically monitor the exchange rates and carry out the transaction when your chosen exchange rate becomes available.

Trade Cost Analysis

The extreme volatility of the foreign currency market makes it difficult to compare transactions, and almost impossible to know if you’re getting the best deal. Privalgo offers a trade cost analysis service – free of charge – to check whether we could match your existing deal at a lower cost.

During our trade cost analysis, we benchmark a varied selection of past foreign currency exchanges to see if you’re getting the best possible price. This service is offered as an opportunity to identify if Privalgo can deliver better foreign currency products, and allow us to secure your custom for the future.

Get Expert Advice

At Privalgo we have the expertise to provide the advice you need to ensure you receive the right foreign currency exchange product to meet your needs. Whether it’s a single transaction or ongoing payments, contact us today for more information.

Which Currency Exchange Product is Right for You?
11 September 2019

Not everyone has the same priorities for exchanging foreign currencies. In some cases, time is of the essence, while for others, a transaction needs to be carried out on a specified date. At other times, there is no immediate rush for the exchange to take place, making it possible to wait for the market to achieve a preferential exchange rate.

At Privalgo, we offer a wide range of foreign currency exchange products suitable for all of the scenarios above.

Spot

If you are planning on carrying out a transaction almost immediately, the spot rate is what you should look for. As the name suggests, this type of contract gives you a price on the spot.

In contrast to forwards (see below) a spot contract is delivered almost instantly and is typically used for transactions no further than two days away.

Spot rates are the simplest form of foreign currency exchange products. Once the spot rate has been offered for the relevant currency pairing, a binding contract is created. “Buy now, pay now” is the easiest way to describe a spot contract.

Forwards (open dated and fixed date)

There are many scenarios that involve carrying out transactions in the future but the foreign currency market has a high degree of volatility, leaving little room for certainty in calculations. This can be hugely problematic, as even a small swing in exchange rates can change the value of the transaction adversely.

A forward contract provides protection against changes in market exchange rates and ensures that future transactions can be carried out at a predetermined rate. For business transactions or large purchases such as property, having a fixed exchange rate can be essential.

Although the contract may not be completed until some time in the future, it is a binding obligation. The forward locks in the agreed exchange rate, even though the transaction is not carried out instantly. There is a small charge for this service and a deposit is paid upfront. However, the full balance of payment is not required until the completion of the forward contract.

The exchange rate agreed upon in the forward contract is protected, regardless of the way the market moves. This can provide significant savings if the exchange rate moves adversely. By contrast, a forward contract can also end up being more expensive if the market moves the opposite way. The forward must be paid for and completed, even if the spot rate in the future is better.

Where security over the end price is vital, a forward contract is an excellent solution. There are two types of forward contract: fixed dated and open dated. Fixed dated (sometimes known as closed dated) are carried out on a date that’s pre-determined in advance. An open-dated forward can be carried out on a date specified later (but still falls within an agreed range).

Market Order

If there is more flexibility over foreign currency transactions, a market order provides an additional option. This allows the rate of exchange to be specified, even if it’s not currently available.

When a market order is placed, the deal is executed for the agreed funds as soon as the exchange rate becomes available. There is no guarantee that the exchange rate will ever become available, but the broker can help advise how to choose a suitable price.

Here at Privalgo, we don’t charge fees for market orders, and unlike forward contracts, they can be cancelled at any time before execution. Once you place a market order, we will automatically monitor the exchange rates and carry out the transaction when your chosen exchange rate becomes available.

Trade Cost Analysis

The extreme volatility of the foreign currency market makes it difficult to compare transactions, and almost impossible to know if you’re getting the best deal. Privalgo offers a trade cost analysis service – free of charge – to check whether we could match your existing deal at a lower cost.

During our trade cost analysis, we benchmark a varied selection of past foreign currency exchanges to see if you’re getting the best possible price. This service is offered as an opportunity to identify if Privalgo can deliver better foreign currency products, and allow us to secure your custom for the future.

Get Expert Advice

At Privalgo we have the expertise to provide the advice you need to ensure you receive the right foreign currency exchange product to meet your needs. Whether it’s a single transaction or ongoing payments, contact us today for more information.

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