Foreign Exchange remains the most liquid and important market worldwide, previously only traded by Central Banks, Speculators and Governments, the retail investor is becoming increasingly more exposed to volatile movements and asset depreciation. There is no avoiding the significance a market move can have on a client buying an International property, but with the correct planning and advice, you can minimize all currency risk and reduce the cost of the property purchase.

Almost every major currency fluctuated beyond bands of 10% in 2007, with significant double digit movements in short spaces of time, creating a considerable risk to any private client requiring currency for an asset purchase. There are however a number of options, and by choosing the correct bank FX needn't be a costly and timely possibility.

Buying currency through a "Spot" contract is the least advisable option, however the most widely used. This simply means buying or selling your currency at the live market rate. This is fine if you need to make a payment quickly or take advantage of an unusually high rate. When buying at the spot price the difference between banks can be significant.

The second option is buying through a "forward" contract. This allows the client to fix the current price for up to 2 years. This is typically used by private clients purchasing property on a payment plan basis. By securing the price for the full value at onset, you know exactly what the property will cost. The benefit is that there is no currency risk once the forward is bought and you do not have to pay for the currency up front, only when you draw down on the balance to make payments.

The third and final option is a "limit" contract. This is an order you place with the bank at a rate that you have budgeted for. If the bank believes the rate is achievable in the time scale needed they will monitor the market for you and complete the purchase should you get the pre agreed rate. The purchase is then made through a "spot" contract.

Currency movement should be managed to work for you, to reduce the cost of your property and hopefully add increased value in the future. Please contact Info@quintessentiallyestates.com for local financial services.