Control your currency as the market moves in 2011

How do you really know what the markets are doing? Do you want your currency to strengthen or weaken? How much should a transaction really cost you? To what extent will changes in the economy affect your money? When is the best time to make an exchange?

Does it all really matter?

These are all questions you’re bound to have asked yourself at some point. The truth is, even a small change in the rate can either send your money plummeting, or give you a generous bonus. Whatever your situation, it’s always good to pick up a little expert knowledge without the jargon.

A lot of people leave foreign exchange matters in the hands of their bank, which is a big mistake. It’s not a widely known fact but it’s certainly a costly one; currency exchange is one of the easiest ways for the bank to pick your pocket; and for larger transactions the losses can amount to hundreds, even thousands of pounds.

Bank fees or commissions for making payments abroad can reach up to 3% and this is before you get hit with extra charges. On top of this, a hidden cost comes from the large profit a bank will make on the rate they offer. This can be as much as 5% which on a £50,000 transfer equates to £2,500 - enough to force even the laissez-faire amongst us into swift action.

Unless you have a specific account manager, the person you are dealing with at the bank is unlikely to be an expert in foreign currency. They may not be aware that the real time market moves every few seconds or be able to offer you flexible solutions to match your requirements. Unfortunately, they’re also less likely to be concerned with saving you money because, let’s face it; banks have an insatiable appetite for your money.

As well as costing more than it needs to, the process of exchanging large amounts of money with a bank can be time consuming and stressful. In addition, the true market rates change every few seconds. So what do you need to consider to ensure it’s a good time to buy, and what are the factors that influence exchange rates?

Control your currency as the market moves in 2011

So here’s a bit of insider information, a list of the various currency influences to keep an eye out for in 2011, and it’s a recipe for a great deal of action in this year’s market:

Speed of recovery from recession – are we there yet?

How is the recovery affecting the major currencies and with the market in chaos, where is the safest place for your money?

Unemployment figures – making the pound work harder.

- How much of an affect do unemployment figures have on market sentiments?
- Greece’s debt problems – the weakest link for the euro?
- Is the euro going to continue to suffer as a result of countries’ fiscal health concerns?

General elections –the pound pressured by politics.

- Just what can we expect from any upcoming elections and how much of a difference will the result make to UK currency?
- National Debt - How will countries like the UK try to combat growing national debt.  Will more countries credit rating be downgraded? What will happen to their currency?
- China - Some analysts believe that China could be the next economic bubble to burst.  If this happens it would have a profound effect on the USD and pacific currencies.
- Inflation/interest rates: Keep an eye on inflation movements in the countries whose currency you are interest in.  If inflation rises central banks normally have to raise interest rates and this will normally give support to their currency.
- Carry Trades: People are borrowing from countries that have low interest rates to invest with countries that have high interest rates.  Try and keep an eye on where investors are borrowing from and also beware that a reversal in the carry trade process can cause a major change in exchange rates.

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Control your currency as the market moves in 2011

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