oliklom

I have heard that you can lock currency rates for 2 years with some companies, is it true?

If so, as anyone locked it when it was very high "1.51" or even last month when it went to 1.30?

And finally can one find someone that has locked the rate and use their account to transfer money at the high rate or is it illegal????????

shirley and anthony hide

Blimey,
Llisten,
You can buy most currencies forward . ie you buy Euros and sell Stg but exchange them at a future date say in 1 years time ,but the price is based on prevailing "spot rate" wiv something added on or taken off to compensate for difference in interest rates between the 2 currencies for that period.But is a one off transaction for a specified amount for a specified date and not a blank cheque that you can write out if currency moves the way you want it to and just buy another lump at original rate.

Bri and Katee

The answer is yes you can agree an exchange rate in advance, but it wouldn't be for a year in advance. Usually it would as you reckon be agreed between you and the money agency you use, ours is Custom House. You agree a purchase price between sterling and euro's and you can have this rate regardless of prevailing monetary conditions for the agreed period.

However it is very very unusual to find that period is longer than 30 days in advance

matt begley

you can book a rate on day 1 for up to 12 mths with hifx if you do 12 regular payments

Ka Ora!

I have it on my HSBC premier account which is offshore. Spot dating Currency Exchange Rates is something you do with your bank or broker, You have missed the good rates as if you phoned now you would be booking at todays rate. The Bank has to be able to see the funds available to complete the transaction and it it usually only available to people shifting Large sums of money. It's far from illegal. Now is a good time to book euro to sterling.

shirley and anthony hide

Thats interesting but not quite right. You would certainly have to specify the amount you are buying up front and only means you have small leaway on settlement date and you still are bound to buy the currency at rate you agreed which would be based on market rate when you struck the deal. You certainly could not just agree a rate at beginning of month say and choose amount you want to buy at some time later in that month. You can buy currencies forward probably up to 2 years I would guess.But rates are still based on spot rate when you strike the deal plus "forward pips" which are calculated to be the spread between the 2 interest rates for the period you are buying ie 1 year forward. The reason why they are probably letting you have settlement date within 30 days is because interest rate differential is small and they can stiff you on the spot if forward pips are against them.

shirley and anthony hide

I think he means by illegal is if someone bought euro at a higher level in the past then they can keep on buying at that level and he wants to use their account to do the same. Not illegal ,just impossible.

bigglesworth

Shirley and Anthony

I think the bit they do not get is that they are BUYING something, a contract for currency, just like a contract for a washing machine.
So think of the exchange rate as the PRICE for the contract.

Just at present, at an exchange rate of 100,000 pounds you can buy approximately 105,000 Euros. You could say to your bank, "Would you sell me the same quantity at the same price 12 months in the future?" and he might agree to do so. What he would not do is agree to do so 12 months in the future, when the exchange rate was 1.03 or something.

oliklom

Thats what I had in mind indeed!!!

oliklom

So you can not really block a rate for 12 month?

Lets say if I would buy 100,000 worth of euros today at the rate of 1,05 and did a deal that in 12 months I would buy 100,000 more euros and blocked the rate of 1,05, If the rate by then would go higher to bad for me but if it would go down I would be safe with my 1,05???

Does it all make sense?

shirley and anthony hide

You can today ask your fx broker to sell you 100,000 euro's for settlement in 12 months time .He will quote you a rate based on todays spot rate and if you deal that rate is fixed and in 12 months time you will take delivery of your euros at the rate he fixed with you today.This is a binding contract for both parties so this rate will not change no matter what the euro does in the next 12 months.This is a one off contract for 100,000 euros ,so you cannot
at a later date increase or cancel this contract at the original rate as the market will have moved and any rate rate he would quote then would be on the spot rate prevailing at that time.

oliklom

Thank for this,

unfortunately It looks like have sadly missed the boat now,

they must be some other ways though!?

bigglesworth

Anthony

He could take out an option surely? Can in most other markets, but you are the currency expert.

Ooliklom --Not that an option is not expensive - they are- especially after periods of significant volatility/

shirley and anthony hide

Well to buy an option say to buy Euros at 1.30 against Gbp for 3 mths for example, which means that at any time within the next 3 months you have "THE RIGHT BUT NOT THE OBLIGATION" to excercise that option and buy euros at 1.30. This is roughly how they would price the premium that you would have to pay for it .
1) you would pay the difference between 1.30 and current rate ie 1.05
for amount of euro you want option for as this is an "in the money option"
ie the strike rate of the option is more favourable than prevailing rate.
2) you pay a premium for the underlying volatility of the currency pair that you are trading ,which in the case of euro/gbp would i suspect be quite large at moment.
3) you pay a sellers spread to the provider of that option as he would quote
2 prices one to buy off you and one to sell to you.
So options to buy are really for people who have a view on currency movements but do not want to have the outright exchange rate risk exposure.
So fro example you could buy an option to buy Stg at 1.05 for next 3 mths which is current rate so you do not pay No.1 above.If rate go to 1.20 say you excercise that option and sell Stg proceeds in spot market at 1.20 and hope your profit covers the premium you paid originally.If Stg goes down all you lose is the premium you pay as you do not have the "OBLIGATION TO BUY"only the right if you wish to do so.

See all clear as mud and not something that anyone who does not understand currency markets should touch with a bargepole

oliklom

YOU CAN SAY THAT AGAIN!

Thanks