Our Guide to the Different Currency Exchange Contracts
Originally posted on & updated on 29th October, 2024
When transferring money to buy a property in France or abroad, many people find foreign currency exchange to be costly, confusing and tiresome. Using your own bank may seem like a good idea, but it is rarely the best option. In fact, high street banks have been known to hold things up and even flounder in certain money market situations.
To avoid such issues, the safest and most straightforward option is to use a service such as my-french-house is offering through its financial partners and experts. The service is fast, foolproof and available online with the added benefit of speaking to your advisor personally when you need.
With a dedicated account manager handling your specific requirements, you won’t have to deal with the frustrations of automated call answering as you might with other financial institutions or even with your own bank.
What’s more, the service is free of any fees or commissions and is designed to be completely stress-free and worry-free, saving you both time and money. Learn about the two different types of contracts and options available for your foreign currency exchange requirements.
Four Types of Contracts
Spot Contract
The Spot Contract is the most basic and popular foreign exchange product. It is an agreement to buy or sell one currency in exchange for another. You have 2 days to settle the contract, at a price based on the prevailing “spot exchange rate” the current value of one currency compared to another.
Although the spot market lets you buy or sell foreign currency as you need it, spot exchange rate movements are highly unpredictable, even during a single trading day. Upon receipt of cleared funds currency is available for onward transmission.
Forward Currency Contract
The Forward Contract lets you buy or sell one currency against another, for settlement no later than on the day the contract expires. Unlike spot contracts, a forward contract eliminates the risk of fluctuating exchange rates by locking in a price today for a transaction that will take place in the future (up to a maximum of 2 years). You also have the flexibility to take delivery of your currency in an agreed time period before the expiry date.
A 10% deposit is required to secure the contract and is payable within two working days with settlement due on the day the contract expires.
Limit Order
A Limit Order is an order to secure currency at a specific price that may not be currently available. This type of contract is particularly useful when the markets are moving in a positive direction for you. This is one of the two most common types of orders, the other being a Stop Loss Order.
Stop Loss Order
A Stop Loss Order is used when the market is moving in a negative direction for your currency. An order is placed on file with your broker to help ease the stress of adverse market movements.
A stop loss order instructs your broker to buy when the currency hits a certain point. The purpose of the stop loss is simple – you want to prevent any further movement before the currency falls any further.
Find out how much money you can save with our foreign currency exchange and transfer service for your property or your business overseas. We can also assist you with most insurance needs (for home, car, health, business, pets, boats ..), and remember, home and content insurance is mandatory on completion date.
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