JC3

Exchanging £££. Getting the extra 2%.

Hi,

For those forumers with an HSBC Premier Account, here’s one way you may be able to squeeze a few more ringgit from your GBP.
While HSBC’s Online Global Transfer system works well, it’s at the ‘hidden’ cost of a poor exchange rate.
Today for example the interbank rate was GBP1 / RM 6.64 but had you done an online transfer the rate offered was only 6.4968, i.e. a loss of 2% on exchanging your money.

With the likelihood of an UK interest rate rise receding I had been hoping to exchange some GBP at around 6.60 and have been using HSBC’s Dual Currency Investment (DCI) product to try to get it.

In my case it worked like this.

On 28th October I made a DCI based on:
a) what I thought the exchange rate would be in two weeks time (i.e. a Decision date of 11th Nov). I chose a Strike Rate of GBP1/RM 6.60.
b) The investment term, I selected a two week term
c) The interest rate offered - 7.42%

I wanted to convert £10,545 and HSBC offered 7.42% pa interest on the Sterling sum for the two week investment term.

In addition, if the base currency traded equal to or strengthened against the Linked Currency in comparison to the 6.60 Strike Rate on the Decision Date HSBC would convert my Sterling plus interest at the agreed 6.60 Strike Rate.

Two weeks later, bingo. The Interbank Rate today was 6.64 so my DCI converted. My £10,545 plus £30 interest became £10,575 and converted at my chosen Strike Rate of 6.60

The bottom line is that I got roughly RM1,300 (£195) extra using a DCI compared to doing a standard online global transfer.

Sometimes it works, sometimes it doesn’t. If it doesn’t, you simply get your Sterling returned with the interest earnt. But if you are not in a hurry to exchange and can track the exchange rate, HSBC's DCI product can be worth exploring. I recommend a short Investment Term if like me you are no Forex expert.

Hopefully the table below explains it better.

JC3

geedee

Holy cow that's complicated!

That's why I'm poor.

JC3

It's actually really easy once you get your head around it - but much easier to understand when you're shown on a computer screen by the bank what your options are.

Really you only need to predict what the exchange rate is likely to be in one week, two weeks or a month's time. If you choose a date in the near future I think you're more likely to get it right, or be close anyway.

The downside is the minimum sum has to be around £10k

JC3

eCdD

You did a good job, but this offered rate is a real shame for HSBC. As they advertise that as premier you get "a better rate" for your transfers in EUR/USD/GBP.

I am now in the move to select our future bank in Malaysia, the exchange rate question is on top of the priority list, number 2 is the interest rate for the 300k mm2h deposit...

Davita

I don't convert to RM but have a number of HSBC premier accounts around the globe. When I global transfer to a foreign account it stays in the original currency until my personal rep suggests a 'special' rate which she sends to my email. I then send an sms to deal...if I agree with the rate. It is always well above the normal HSBC transfer rate but I don't get any interest on the original amount if I let it sit in the account.
I'm interested in this 'dual currency investment' so thanks for the info JC3...I'll chat to my rep about it next we meet.

InVinoVeritas

I'm obviously too lazy and just press the big blue button "transfer now".

bakedbean

I think it makes a lot of sense if you've got Sterling funds. Interest rates are pitifully low so why not make a gamble. And it's not much of a gamble. It's not as if you're risking your money. Well done JC3

OK I just need a HSBC account here now

JC3

Hi,

There's a bit of risk, in terms of losing out on the upside.

With the investment I illustrated above, the risk (as I see it) would be that during the two week investment 'term' the ringgit was to plunge. Let's say from RM 6.54 on 28th October to RM 7.00 on 11th November. I would be locked-in to exchange at my RM 6.60 strike rate, so would miss out on the extra RM 0.40 (RM 7.00 - 6.60), that 'profit' going to HSBC.

That's why I prefer a shorter investment term.

In my case I took a guess that the ringgit would weaken a little further against the pound over the next two weeks, i.e. from RM6.54 to RM6.60.

JC3

eCdD

Yes, that is what they explained to me at HSBC also. But how happy you are wirh the "special rate" the usually suggest? That means how big is the spread from the interbank rate?

Davita

I've recently only converted from UKP to IDR. Where I live in Bali cash money changers display their rates on billboards, when my rep offers a better rate, I just text "Deal"
I confess I don't follow the interbank and daily rates too closely...I trust she will follow for me... that's her job!
I understand that Premium clients are offered a better rate (manager's discretion) than other clients.

Scuba Tyke

Thanks for the info JC3, I will look into the DCI method.

However, an alternative way to beat bank rates is to use Transferwise. I have recently been taking advantage of the weak Ringgit and have used them regularly to get a good deal, compared to regular transfers through banks.

For instance, as I write, the different methods of transferring GBP 10,000 to MYR would give me:

Via Forex service, using Interbank Rate = MYR 64,724 (rate of 6.4724)
Via Transferwise = MYR 66,299 (£10,000, minus 49.75 fee charged before transfer, giving effective rate of 6.6631)
Mid market rate is currently showing 6.69212

It works because they do not actually move money internationally, but have accounts in both countries. I pay money into their UK account, they move money from their Malaysian account into mine. No foreign exchange takes place, brilliant idea!

Setting up your account is easy. However, I have a UK address, which I had to provide proof of via the usual bank statement etc. So that might make a difference, depending on individuals circumstances. If anyone is interested PM me your email address, they give discounts for referrals and new account holders receive a free £3,000 transfer, if referred by an existing account holder. Hope this doesn’t break any forum rules? If so let me know and I will delete the invite to PM.

ST

bakedbean

I'm very slightly off topic but want to ask you HSBC Premierers a question.

I've got a HSBC account in the UK but, currently, nowhere else and not in Premier currently so I don't know exactly how things work online.

Question is.....
If say, today, you wanted to do a Fixed Deposit in a Foreign currency for 12 months, can you just go online and get the Premier (preferred) interest rate....and do it online?
Or
Is it like other banks (sigh) where there is a little performance negotiating a good interest rate and then the signing of umpteen bits of paper, providing passport, blah blah blah?

Davita

Not quite sure I follow your intent BB but...I don't think any bank will allow to set-up a Fixed Deposit (foreign or local currencies) without paperwork.
Once established then on-line transactions are the norm.
I have pre-signed many papers to authorise my rep to do the exchange deals over the phone which she records...banks are very cautious and rightly so.

Pulaski

The big banks employ teams of traders and economists and still can't do much better than a coin toss to determine whether the rate will move up or down. If they could reliably predict the rate even a week or two forward they would be able to make a fortune trading currency, but they don't and many lose money, because for all their expertise and fancy computer systems they can't predict the future exchange rates. So it is nonsense to suggest that a punter sitting at home on the sofa can predict the exchange rates any better than pulling random numbers out of a hat.

Use an on-line FX broker, such as Transferwise (which Scuba Tyke recommended), WorldFirst, xoom, xe,com, or a myriad of others. Many will get you to within 1% of the mid-rate (what most people know as "the exchange rate") whereas the big banks are often 4%-5% from the mid rate.

NeonHippy

You actually have a couple of questions here. Firstly, if your account in the UK is a personal account, there is no facility for foreign currency accounts. Foreign currency accounts are only available to business customers.

You have two obvious options for holding foreign currency accounts. These are acounts in a Malaysian branch of HSBC or accounts in the expat banking arm of HSBC. The later is based in Jersey but you will most likely be dealing with their expat branch in Hong Kong.

In theory once you become a premier customer you are a premier customer in each juristic ton that you bank. However, in my experience each country does not have automatic access to your accounts in the other countries and you have to register as a premier customer in each country to establish global view for all of your accounts.

To answer your actual question, when we opened a savings account in Mrs NH's name last year we were assured that as premier customers we would automatically get the preferred rate. The account matures in May and we will see.....