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Faqs On Foreign Exchange - Including Using The Exchange Rate Calculator

By Expert Author: Adam Wood

Here are replies to some of the top FAQs by companies with foreign currency exchange needs.

Where can I find the best currency exchange rates?

The only real way to know is to shop around. Typically you’ll find that better rates may be available from specialist forex exchange providers rather than an ‘over-the-counter’ type service through a bank.

However, you may not have the time or inclination to ring around every single time you want a quotation. It might be better to look for a specialist forex provider who can work in partnership with you to understand your requirements in advance and to then apply forex strategies to obtain the best rates possible.

What is an exchange rate calculator?

There is nothing mysterious in this.

Some online forex providers will offer you a facility to enter things such as amounts in one currency and show the rate plus associated conversion into another currency.

Note though that an online exchange rate calculator will usually off only ‘indicative’ conversions and rates – probably based upon ‘spot’. You may need to apply for a formal quotation.

Note that your best interests might be served by getting rates based upon the totality of your business needs and a strategic partnership (with associated forex strategies) with a selected provider.

What alternatives are there to spot rates?

You’ll see lots of different terminology here including things such as forward rates, forward contracts, hedging and so on.

The bottom line is that a spot currency exchange rate is one based upon a rate valid at the time the deal is struck and which will be settled within 2 working days.

There are other options available though that will enable you to fix a conversion rate for a specified time in the future, if that suits your business needs.

An experienced and specialist forex provider can explain in more detail.

How do forward contracts relate to exchange rate calculations?

If you have agreed a rate valid at some time in the future, it will typically relate to a time period and perhaps an amount range.

So, agreeing a forward contract for say 750k dollars in 6-8 weeks’ time might give you a rate that wouldn’t be available if you were looking to convert say 2k dollars.

It’s all very clearly laid out in your forward contract and you won’t need an exchange rate calculator to keep tabs on what’s happening!

Where will the foreign exchange deal actually be struck?

You really won’t need to worry about that as far as physical location is concerned.

If your forex provider is in Australia, they should be fully regulated and subject to Australian law. In fact, their deals will often be done in the electronic world that doesn’t have a physical location as such. They may be based upon market prices in Europe or the USA and in fact, the most successful providers are likely to be those that work the markets globally.

None of that need really matter to you – providing you’re using a fully registered company with appropriate insurance and offering concrete guarantees that your money will be safe.

How is my money safe when in somebody else’s hands?

The law demands that financial organisations maintain sufficient levels of what’s called ‘capital adequacy’. That’s a fancy way of saying that they have enough cash reserves on hand to make sure they can’t go bust if they have a run of misfortune.

Such companies should also be periodically externally audited and be fully insured.

It’s well worth looking for forex brokers who meet all these requirements rather than just looking for those that have an appealing exchange rate calculator on their site!

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