For businesses that operate globally or have international expansion plans, currency exchange rate fluctuations can create added complications when reducing costs associated with sending and receiving international payments.
Currency fluctuations occur for several reasons, including changes to a country’s base rate, marketing speculation and political instability. A case in point is the ongoing outcomes of the Bank of England Monetary Policy Committee, meeting regularly throughout the year to make decisions about the UK’s base rate.
How a base rate affects a currency’s value
Changes to a country’s base rate can have a knock-on effect on currency exchange rates. Overall, a higher base rate leads to a stronger currency, attracting foreign investment and increasing the demand for and value of the currency. Meanwhile, a lower base rate can lead to a depreciation in the currency's value, meaning that losses during conversions could be more significant when making international payments.
Whilst a base rates offers an insight into the future value of currencies, base rate fluctuations are not a hard-and-fast rule for currency valuation with other factors at play. For instance, the Financial Times reported that the pound hit a one-year high against the dollar after UK inflation figures came in slightly above expectations at two percent for June 2024[1].
Even seemingly small currency exchange fluctuations can be costly for growing businesses when paying international suppliers, making it more difficult to budget for their outgoings and generate accurate cash flow forecasts.
Understanding bespoke FX services
Tailored FX solutions are designed with a deep understanding of a client's specific objectives and priorities, aiming to minimise the adverse effects of currency fluctuations. By working closely with clients, these services offer strategic insights and customised approaches to manage currency risks effectively.
For corporate clients, customised risk management strategies are available to address a variety of business goals. Whether focusing on paying international suppliers, facilitating global expansion, or navigating the complexities of mergers and acquisitions, these services offer flexible options to meet diverse financial needs.
The benefits of a customised approach
Engaging with a tailored FX service means accessing solutions specifically crafted to fit the unique requirements of each business. By thoroughly understanding a client's operations and goals, these services can develop targeted strategies that are both effective and efficient.
Clients benefit from a dedicated account manager and can manage currency risks through various tools such as forward contracts, spot contracts, and limit orders. For example, forward contracts allow businesses to lock in an exchange rate for settlement on a specific date in the future, providing greater budget predictability for international transactions. Spot contracts enable immediate currency exchanges at agreed rates, while limit orders give businesses the flexibility to set and achieve desired exchange rates, enhancing control over financial outcomes.
A customised approach ensures that businesses not only mitigate risks but also optimise their financial strategies in the dynamic world of foreign exchange.
Implementing bespoke FX services in your business
In today's complex global markets, having the right FX strategy is crucial for business success. Our FX services are designed to support businesses' currency exchange needs by providing comprehensive, tailored solutions that align with their unique objectives. Focusing on delivering value without compromising on quality, our FX brokerage services empower businesses to navigate the challenges of international markets with confidence.
[1] https://www.ft.com/content/8e67c1b8-156e-499b-961a-ca6b97dfb955
