At the moment I work in a good job in the City and have been trying hard to save over the last few years. However, I plan to return to Australia within the next 18 months. When should I start looking to move my savings?
This is an interesting question given recent currency fluctuations, according to Nat Davison a currency specialist at Global Reach Partners. The truth is it is never too early to start considering the effects of the currency market — especially if you have interests to protect, such as your savings.
In the last few months we have seen the Pound make rapid gains against the Aussie Dollar. In mid March the Pound was worth $1.43. Just 14 weeks later Sterling had appreciated to $1.68. This equates to a difference of $2,500 for every £10,000 you transfer.
At the start of July the Reserve Bank of Australia kept interest rates on hold at 2.75%. However, the statement released acknowledged that further reductions to the lending rate would help foster a rebalancing of growth in the country’s economy. This would suggest that the Pound will continue to appreciate against the Aussie Dollar in the near term. Many people would feel tempted to enjoy this period of relative Pound prosperity but there is risk inherent in doing so. Those in the know see this as an excellent opportunity to use tailored currency solutions to secure a good rate for the longer term and make sure that their money is protected should the markets change.
So how do you ensure that your hard earned savings are not at the mercy of the ever changing currency market? One thing is certain, until an exchange rate has been agreed you cannot budget with any certainty. One option would be to set a ‘Limit Order’ which allows you to trade all or part of your savings when the rate of exchange reaches your pre-decided target rate.
But when is the right time to lock in to a rate of exchange? We are all guilty of wanting to trade at the peak of the market, however, in reality; we only know the top when it has gone. Nat recommends that you work alongside a currency specialist to buy your currency at a favourable rate of exchange that fits within your costed budget. You can feel satisfied that you can draw a line in the sand against exposure to any future negative currency movements.
An alternative solution would be to lock in a favourable GBP/AUD exchange rate by way of a ‘Forward Contract’ — a type of ‘buy now, pay later’ solution that allows you to fix an exchange rate for future delivery of funds, often up to 12 months ahead. Fixing your currency exposure in this way will assist your cashflow with only a small percentage of the total trade amount required up front as a deposit. You will also have peace of mind from knowing exactly how many Dollars your Pounds will equate to when you move back to Australia.
You should take care when selecting a bank or specialist broker and ensure they have the right solution to suit your needs. Currency brokers, such as Global Reach Partners have come to the fore in recent years as they are able to offer more flexible and cost-saving solutions, although many people are still using their banks for currency transfers. Ultimately, it is your money so you need to be comfortable with who you opt to work with.
To speak to Nat or his team about your foreign exchange requirements call 0203 3465 8204, email personal@globalreach-partners.com or visit globalreach-partners.com/fx/aud.