FOREIGN EXCHANGE INFORMATION

Find information on how to carry out large and small international currency transfers below.

        

Foreign Exchange

Please note that this section applies to large currency transfers of around $3,000 and over.

What is Foreign Exchange?

Foreign exchange is the conversion between two currencies at any one time. The foreign exchange market is accessed all around the world by large banks, corporations, foreign exchange dealers and brokers and individual investors.

The foreign exchange market has no central exchange and most trading takes place electronically via sophisticated online platforms. A trade can take place between any two entities – be it private or corporate investors, travel currency companies or banks. Trading always takes place between two currencies, known as a 'currency pair'. For instance, the Canadian dollar is paired with all major world currencies including the US dollar, the British pound, the euro…and so on.

What is a Foreign Exchange Service?

You will need a foreign exchange service any time you need to transfer or convert money from your currency to another. A foreign exchange service in this instance is a brokerage firm that specializes in providing currency exchange services for both private and corporate clients. As specialists, foreign exchange services offer excellent exchange rates between all major currencies and a swift, cost-effective method of transferring currency.

Can I Use my Normal Bank?

Yes. You can carry out international currency transfers at your nearest bank branch. However, in recent years more and more people have become aware that the process offered by normal banks is generally more expensive than by going direct to a currency specialist. Not only that, the transfer often takes longer too.

Why are Banks more Expensive?

Banks are unable to offer exchange rates as good as foreign exchange specialists because they have much larger overheads. They do receive the Interbank rate but will take large margin out of this before they pass on the rate to their customer. This leaves the customer with a poorer rate. Additionally there may be commission fees and other administration charges.

Foreign exchange brokerages are specialists in the field of currency exchange so they are focussed on one area. They have smaller overheads so the margin they take from the Interbank rate is much smaller – meaning they can pass more of a great rate on to their customers. They do not subject their account holders to anonymous call centers – each client can reach an expert dealer anytime via the telephone or email.

What is the Interbank Rate?

The Interbank rate is the internal rate of interest that is charged on short term loans between large banking corporations. They borrow and lend to one another on the Interbank market and is used for trading of foreign currencies. This is the rate that you see when you view live currency charts and can be used as a benchmark.

However, the rate that individual customers receive is never exactly the same as the Interbank rate. As stated above, normal banks take a chunk of this rate to pay for their large overheads while foreign exchange brokers pass on the majority of the rate to their customers.

When Should I Use a Foreign Exchange Service?

Anytime you need to make a large transfer to another currency you could use a good foreign exchange service to make this process as fast, secure, painless and cheap as possible. You might need to set up a regular foreign transfer for an overseas mortgage, or perhaps you have emigrated overseas yourself. Maybe you need to pay for staff or products based in another country – whatever your reason, if the amount you need to transfer is at least $3,000 a foreign exchange brokerage can offer an excellent service.

If the amount you need to send is less than this amount then the broker may charge a flat fee of about $10 – though do check this advance. If you want a lower cost alternative for low transfer amounts, view our Money Transfer area for a range of dedicated companies.

What is the Transfer Process?

By using Which Way To Pay Canada you can compare some of the best foreign exchange brokerages in Canada. Look at what they offer, whether there are any fees (check to see if commission is charged) and what they require.

It is very easy to set up an account with a foreign exchange broker. They will usually require that you have some form of employment and will require that you have a chequing account to make transfers. They will need to confirm your ID and the rest is easy.

Once your account is set up you can carry out transfers right away. Each time you need to make a transfer you simply need to call / email your broker and announce which currency you need to send money to. They will quote you the latest exchange rate for this currency and if you are satisfied then you can go ahead with the transfer. The broker will set up a highly secured transfer form, which requires the bank details of your bank and the account you are sending to. The transfer usually takes between 1 and 4 working days.

Corporate Foreign Exchange

Foreign exchange brokerages generally offer corporate clients a separate account service to their private clients. This gives each entity a much more focused service – the corporate client knows that their broker is dealing principally with corporate transactions and has a high level of expertise to suit this.

Corporate clients often require large volumes of currency trade, be it for payment of goods and services based abroad or to pay overseas staff directly. Many large firms also carry out direct currency trade for investment. For all these requirements a foreign exchange broker is the perfect solution. They offer extremely competitive rates (usually within 1% of the bank wholesale rate) that are updated frequently and the option to tailor the account precisely to your firm.

If your risk exposure is high, you can arrange for a bespoke hedging strategy, to minimize your risk level and optimize a good rate for up to two years in advance. You can also choose from other strategic orders, from the complex to the straightforward.

Most corporate foreign exchange services will give the client the option to choose between a bespoke personalized service, with most the of the responsibility shouldered by the broker, to a more direct platform that allows the client to undertake direct trade all hours of the day.

        


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