Business & Economy - Foreign Exchange

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Business Needs are Different

Clearly, the foreign exchange needs of a business differ a great deal from those of the individual. Depending upon your type of business, you might only have to make periodic, large transfers on short notice. Or maybe your business is an international concern making it susceptible to fluctuations in worldwide exchange rates. Perhaps the nature of your business means that you can plan money transfers well ahead of time, thereby making it possible to minimise the costs of such transactions through intelligent forward planning. Whatever the scenario, each of these cases will demand very different financial solutions.

The first place many companies look to exchange money is a bank but there are a number of good reasons why a bank might not be the best option for a business. Basically, foreign exchange is only one facet of any bank's overall portfolio. Foreign exchange companies, however, are focused upon only this endeavour and, therefore, deliver a specialised service. Also, currency companies convert vast amounts of money everyday and because of this specialisation, do not need to take as large a percentage of the money exchanged as payment. Their profit is made from the sheer volume of transactions, not on high charges.

Because currency exchange specialists are only focused upon with exchange rates, these companies can also look ahead at trends and some can even offer a business some level of protection against wide fluctuations in the currency market. One way that this can be done is by obtaining a guaranteed rate of exchange by the forward buying or selling of currency. This option is also attractive because it does not require the liquid funds from the outset. It can provide a comfortable buffer from variations in the currency markets.

It might also be possible to place "stop loss" and "limit" orders on your exchange of currency as a form of protection from fluctuations. Stop loss orders set the lowest limit at which your company is prepared to buy a certain currency, thereby protecting you from negative movements in the market. Limit orders set a favourable level that the currency must reach before you wish to exchange currency. When the currency equals this level, your order will be put into motion. Both of these mechanisms can be activated and cancelled at any time, providing a great deal of protection for your company.

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