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Exchange rate volatility can have a profound impact on the purchasing power of individuals, especially when it comes to luxury goods such as yachts and other high-end items. To ensure you get the most for your money it's important to learn how to effectively navigate in the stormy seas of the currency market.
The Impact of Currency Volatility on High-Value Purchases
Currency volatility can pose challenges when it comes to budgeting for overseas purchases. Unpredictable exchange rates can make it difficult to determine the final cost of an item. This uncertainty can lead to either overestimating or underestimating your budget, potentially impacting your ability to make the purchase you had in mind.
A sudden depreciation of your local currency against the currency in which the item is priced can lead to a steep increase in its cost. For luxury purchases, where the asking price can be substantial, the difference this could have on what you receive for your transfer could be thousands.
Let's look at how currency volatility could impact the purchase of a yacht in France. Said yacht is being sold for €250,000. In late August 2023, when the GBP/EUR exchange rate was at €1.17, you would need to transfer around £213,675 to cover the purchase.
However just a month later the GBP/EUR exchange rate had fallen to €1.14. Meaning you would now need to transfer roughly £219,300. A difference of almost £6,000.
Securing a Great Exchange Rate and Mitigating Currency Risk
As a specialist FX provider, TorFX offers a more dedicated service than banks tend to. You have greater freedom and flexibility over how and when you move your money, and you get personalised support from friendly currency experts.
In addition to offering more competitive exchange rates than most banks, TorFX doesn’t charge any transfer fees, meaning you should see immediate savings.
In addition to helping you secure a great exchange rate, TorFX also offers a range of extra transfer options which can help you minimise your exposure to currency volatility, while also maximising the potential returns on any international transfers.
A Forward Contract allows buyers to lock in an exchange rate for a fixed amount of time, providing a hedge against unfavorable currency movements. While you might lose out if the exchange rate improves you would also be protected against any unfavourable shifts.
Limit Orders are another useful tool and are great if you have time to hold out for a better exchange rate. Simply set a target exchange rate, and when the market reaches your desired level, the transaction is automatically executed. A Stop Loss Order can be used in conjunction with a limit order and allows you to set a minimum rate to purchase your currency. Meaning you can wait for a better rate but still be protected from any sudden downturns.
Get a free quote today to find out how much you could save on your transfers.