Corporate Foreign Exchange is big business, there are a number of different reasons why a business may require different currencies. Here we will discuss some of the things which you should look for when purchasing foreign currency.
If you have good or suppliers which are overseas, then you may potentially be exposed to currency fluctuation. The currency prices between different currency pairs are constantly moving 24 hours a day. Therefore many business owners choose to hedge their currency. What does this mean? Well there are a range of different hedging options, but a vanilla (straight forwards) hedge could be a forward contract for an agreed volume of a particular currency at a pre-determined rate. So from the businesses perspectives this means that they have a fixed cost for the purchase of goods or services from overseas.
The above example is an extremely simple and commonly used practice by a wide range of businesses both in the UK and around the world. Of course if your business can pass on any currency fluctuations directly to your clients, then you may wish to purchase at the time which you require the currency. Most foreign exchange providers will offer a number of different platforms through which you can purchase currency. These will normally include a desk which you can call as well as Internet and email based services.
The foreign exchange or currency exchange provider will make a margin over and above the live price of a particular currency pair. So for example if UK Sterling were trashy against US Dollar at 1.523, the currency provider may charge a 0.75% margin over and above this live price. Different providers will charge different margins, therefore it is extremely important to compare corporate foreign exchange.
When you get into the more complex options and derivatives which are available with currency exchange, then there will be an element of margin which is included in each element of the transaction. As currency prices are constantly changing and fluctuating, you need to make sure that you are comparing like for like if you receive quotations from a number of providers.