Sitting on $1 Million
I'm hoping there may be some traders on this forum, or people who understand the US currency market better than I do..
I run a UK based company which trades globally, we invoice in £, $ and EURO's and are currently sitting on a currency surplus of US$500k with further US$500k bank funding availability.
We have a rolling loan account from an investor, with a current balance or around £1 Million, and expect to be required to pay back half of this in the next 4-6 weeks.
I have been looking to find the most efficient way of turning these $US into £Sterling, but we have no experience of currency trading. We have been dealing with a currency broker who has given some advice, but i'm aware they have their own agenda, so i'm reluctant to take advice from them at face value and feel we need to take our own view.
Is there anyone with experience or knowledge of currency markets who can advise whether we should be changing our $ into £ immediately? Or if we would be better to sit on them and wait for the exchange rate to improve in our favor? Or some mixture of these options.
At this stage we have agreed to exchange $180k at current value and wait to see how the $ value changes over the next few days.
I'm aware this is not a black and white area and the people who know the best strategy will not necessarily want to share in on a public forum, but would be grateful if anyone can recommend things to look out for or to point me in the right direction of any relevant literature i should be reading or possibly relevant threads here on 2p2?
Thanks very much
5 Replies
I'm in a similar position but need usd and have cad. Thoughts on using oanda? Seems the cheapest just more difficult.
I used to use FIRMA when I paid USD for container shipments from China. The minimum exchange was around $25k back then, less if you did regular exchanges.
Recently I got better quotes from Vancouver Bullion Exchange.
It helps if you do a regular trade as your Forex broker will try to get you a better rate so you will come back next month.
Agree:
- Agree with the fact that you can't predict currency pair movements of such high volume currencies
- You still have an issue of being exposed to risk
- Banks take high fees
- other services may exist which are cheaper (transferwise)
- Asking your network if they have an inverse operation may be cost neutral
My take:
- Every trade is -EV, best +EV strat is to keep money as still as possible.
- You may look for short term colocations, especially if you know your due date. 1 Month treasury bonds should pay +0.5% per month. Not much but it tilts things in your favour.
That said if you absolutely know you are going to sell those USD to EUR, then do that as soon as possible.
In some markets doing an inmediate trade pays a premium though. High liquidity market like this, should be very close to 0, especially if P2P.
- Alternative services carry more risk (transferwise)
- Asking your network for inverse trades costs brainpower and expends social capital
- Asking your network may improve your networking by finding people in a similar position
- You may have to widen your range, someone has to.
- You should price this issue into trades, charge slightly more to americans, or be slightly less willing to do business with them.
I'll admit that my experience with this issue is concerned with much lower volumes, but I think the same principle applies, there's always smaller and bigger fish.
Regards, Tom.
Agree:
- Agree with the fact that you can't predict currency pair movements of such high volume currencies
- You still have an issue of being exposed to risk
- Banks take high fees
- other services may exist which are cheaper (transferwise)
- Asking your network if they have an inverse operation may be cost neutral
My take:
- Every trade is -EV, best +EV strat is to keep money as still as possible.
- You may look for short term colocations, especially if you know your due date. 1 Month treasury bonds sh
Ultimately it's a matter of whether you want to use a centralized exchange for a fee (like a bank or currency exchange) , or go peer to peer (with personal network or a credit union)
Usually, unless you are in an ultra-low margin business, it's much more efficient to pay like 0.5% to 2% of fees for high volume alternative exchangers and save your brain power for business.
I'm pretty sure he already made the transfer guys, it's been 11 years
