Back to work or a change of heart
Following the lockdown of many countries around the world, some expats or people working on projects abroad who returned home, may find themselves heading back to work. For those heading back to work a new normal exists, that could be in the form of a new role, a new job or the current working environment you find yourself in.
For others, the dramatic impact of the coronavirus pandemic has changed both short-term and long-term plans resulting in expats wanting to return home or wanting to purchase a property in their home country to give them more a foothold.
Whichever group you fall into, like everyone, you are likely to have faced some disruption throughout 2020, whether this be professionally, personally or financially. And while it may seem like we are far closer to normality than we were a few months ago, there is still plenty of uncertainty on the horizon.
Problems you may face
When there is uncertainty there is often volatility, and if volatility persists in the currency market expats who are back at work or potentially returning to their home country could find their hard earned money at risk.
Currency UK works with lots of individuals who take on projects overseas and who sometimes move to work in that country for a period of time. The majority of these people still have commitments in their home country while they are working abroad, such as family to support and mortgage payments.
The problem for employees is that they are often getting paid their salary in a currency that is different to their home currency. As a result, they need to exchange their salary or part of their salary into a different currency.
On the flip side, expats looking to return home may be buying or selling property in order to make that switch and could find themselves losing out on the exchange rate if the markets move against them.
People tend to use the bank and many people don’t tend to question the exchange rate that they are given. Most banks will charge a transaction fee of around £25 and charge you up to 4% of the total transaction through the exchange rate they give you. This is where using a FX broker has its benefits, as due to their smaller overheads they can offer a much more competitive exchange rate.
For example, if I had sold a property in Spain in March 2020, the GBPEUR rate fell to as low as 1.0607. Therefore if I had received 180,000 euros from my property it could have been equivalent to £169,699 depending on when in the month I exchanged it.
If however I had sold the same property, for the same amount, but had sold it in February 2020, during which time the GBPEUR rate reached highs of 1.2044, my 180,000 euros could have been worth only £149,452.
Essentially in this scenario factors outside of the seller's control would see them lose up to £20,000 if they had sold a month earlier when the rate plummeted. This is why it is crucial to work with an FX provider who can lock in exchange rates for you, allowing you to exchange currency when the market is in your favour and keep your profits safe even when the market moves against you.
This is a big part of what we do and our bank-beating exchange rates save our customers thousands.
Exchange rates change all the time, but significant movements in the market can result in your salary being worth less when sending it home.
From April 2019 to April 2020 the GBPUSD rate at its lowest was 1.1435, a very favourable rate for people transferring dollars into pounds. However, during the same period the rate peaked at 1.3475. In this instance $80,000 would have been worth £69,952 in March 2020, where as in December 2019 it was only worth £59,368.
A £10,000 loss due to factors outside of your control is huge and is a risk you need to mitigate. This is something that Currency UK can help expats with, through the use of a forward contract. With this service we can ensure your salary remains the same each month when transferring it to a different currency, even if the rate moves against you.
You can start the process of preparing for currency volatility yourself, the simplest way to do so is to be aware of what announcements both politically and financially could cause a shift in the market and plan your payments accordingly.
But, the most effective way to keep your bottom line safe when dealing with orders and payments abroad is to lean on us. Our job as FX brokers is straightforward; we mitigate currency risk for your business and make the whole process of foreign exchange as simple as possible, no matter how unusual the circumstances.
To find out more about saving money on your international transactions and risk management for salary repatriation speak to a member of our team by calling +44 (0) 20 7738 0777.
Posted in Expat Resources on Aug 24 2020